95-0644
Income
____________________________________
PETITIONERS :
: ORDER
:
:
Petitioners, : Appeal Nos. 93-1957, 94-1274,
: 95-0644,
95-1125, 94-0616, 94-0617,
v. : 94-0619, 94-0626, 94-0647,
: 94-0651,
94-1241, 94-1244, 94-1245,
AUDITING
DIVISION OF THE : 94-1248, 94-1269, 94-1271, 94-1487
UTAH STATE TAX COMMISSION, : 95-0049,
95-0215, 95-0642, 95-0643,
STATE OF UTAH, : 94-1242, 95-0385, 95-0867
: Audit
Periods: January 1, 1985
Respondent. :
through December 31, 1988
_____________________________________
Due
to a clerical error, the Joint Proposed Order signed by the Tax Commission on
February 10, 1998, is hereby rescinded.
In its place the following Order is issued:
STATEMENT OF CASE
An
Initial Hearing was held in the above captioned matter on February 28,
1996. Chairman W. Val Oveson, and Jane
Phan, Administrative Law Judge, presided.
Present and representing Petitioners were PETITIONERS REP. and
PETITIONERS REP.2, CPA. Also present
was PETITIONERS REP.3 on behalf of the Petitioners. Present and representing Respondent was RESPONDENT REP.,
Assistant Attorney General. Also
present were Mr. Frank Hales, Mr. Dan Engh, and Mr. Brent Taylor, on behalf of
the Auditing Division.
DECISION AND ORDER
Based
on the evidence, proffers of evidence, and testimony presented, the Commission
orders, adjudges and decrees as follows:
1. Based on the court rulings in Ute
Distribution Corporation et al. v. Utah State, 721 F.Supp 1202 (D. Utah
1989) and Ute Distribution Corporation et al. V. United States, 938 F.
2d 1157 (10th Cir. 1991) distributions from Ute Distribution corporation to its
stockholders represent taxable income to the stockholders. Also based on said court decisions, the
distributions are not taxable dividends but, instead, represent a pass-through
of each stockholder’s pro rata share of all items of income, deduction and
credit collected by Ute Distribution Corporation.
2. An oil depletion allowance shall be allowed
in accordance with applicable federal tax law with respect to all oil royalties
received by each stockholder through Ute Distribution Corporation. Each Petitioner agrees to file a form TC40,
or other appropriate tax form, for each year in question, and prospectively
from the date of this Order, properly reporting distribution through Ute
Distribution Corporation to that stockholder.
3. The Petitioners’ arguments relating to the
statute of limitations as described in Utah Code Ann. §59-10-536 (1987) are
rejected.
4. The Commission orders that all interest and
all penalties assessed against Petitioners for all open years, calculated based
on additional taxes resulting from the receipt of distributions from Ute
Distribution Corporation, are waived in full, if the tax is paid within 180
days of the execution of this Order.
After that date, statutory interest shall begin to accrue.
5. Based on a showing of reasonable cause, the
Utah State Tax Commission recommends that all interest and all penalties
assessed against stockholders of Ute Distribution Corporation for all open
years, calculated based on additional taxes resulting from the receipt of
distributions from Ute Distribution Corporation, be waived in full, if the tax
is paid within 180 days of the execution of this Order. After that date, statutory interest shall
begin to accrue.
6. The Auditing Division is ordered to provide
to Petitioners and those individuals listed in paragraph 7, all reasonable
assistance in the preparation of appropriate tax filing for the years in
question. Petitioners herein are
ordered to provide to the Auditing Division all reasonable assistance to assist
it in preparing the revised calculations and recomputations.
7. This decision regarding these Petitioners
will be binding with respect to all open years for the following persons: XXXXX, appeal #93-1957; XXXXX, appeal
#94-1274; XXXXX, appeal #95- 0644; XXXXX, appeal #95-1125; XXXXX, appeal
#94-0616; XXXXX, appeal #94-0617;XXXXX, appeal #94-0619; XXXXX, appeal
#94-0626; XXXXX, appeal #94-0647; XXXXX, appeal #94-0651; XXXXX, appeal
#94-1241; XXXXX, appeal #94-1244; XXXXX, appeal #94-1245; XXXXX, appeal #94-
1248;XXXXX, appeal #94-1269; XXXXX, appeal #94-1271; XXXXX, appeal #94-1487;
XXXXX, appeal #95-0049; XXXXX, appeal #95-0215; XXXXX, appeal #95-0642; XXXXX,
appeal #95-0643, XXXXX, appeal #94-1242; XXXXX, appeal #95-0385; and XXXXX,
appeal #95-0867.
8. Petitioners are ordered to pay Utah State
income tax in accordance with the terms and conditions of this Order for all
tax periods subsequent to this Order.
This
decision does not limit a party’s right to a Formal Hearing. However, this Decision and Order will become
the Final Decision and Order of the Commission unless any party to this case
files a written request within thirty (30) days of the date of this decision to
proceed to a Formal Hearing. Such a
request shall be mailed to the address listed below and must include the
Petitioner’s name, address, and appeal number:
Utah State Tax Commission
Appeals Division
210 North 1950 West
Salt Lake City, Utah 84134
Failure
to request a Formal Hearing will preclude any further appeal rights in this
matter.
DATED
this 3 day of March, 1998.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
JANE PHAN
Administrative Law
Judge
The
agency has reviewed this case and the undersigned concur in this decision.
DATED
this 3 day of March, 1998.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Richard
B. McKeown
Chairman Commissioner
Joe B.
Pacheco Pam
Hendrickson
Commissioner Commissioner
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