- 9 - reported combined taxable wage income of $43,251 in 1996 and $52,187 in 1997. In addition, petitioners received $30,000 of income in each year representing the payments resulting from the lawsuit discussed above. During the years in issue, petitioner was the sole shareholder of an S corporation named Southern Financial Investment Services, Inc. (SFIS). SFIS was incorporated in January 1990, and elected Subchapter S status in 1996. From its incorporation until the time of trial, SFIS had never generated positive net income. The following represents the “receipts” and “deductions” of SFIS in each of the years for which the amounts appear in the record: 1991 1993 1994 1995 1996 1997 Receipts $-0- $-0- $49,705 $3,829 $335 $292 Deductions -0- -0- (79,611) (54,445) (15,308) (15,163) Net loss -0- -0- (29,906) (50,616) (14,973) (14,871) In the years in issue, SFIS reported the following on its corporate Federal income tax returns: 1996 1997 Gross receipts $335 $292 Cost of goods sold -0- (4,947) Rents -0- (1,200) Taxes and licenses (2,551) (1,193) Interest (2,592) (23) Depreciation (289) (289) Advertising (372) (114) Legal/professional (2,577) (2,577) Other expenses (6,927) (4,820) Ordinary loss (14,973) (14,871) In each year, petitioners claimed a deduction for the entire loss on their individual income tax return as petitioner’s 100 percentPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011