"small business corporation" under section 1366,1 so as to enable
them to claim a deduction for an ordinary loss of $129,083 and a
deduction pursuant to section 179 of $3,057; (2) whether
petitioners are entitled to a long-term capital loss carryover
from 1987 of $61,468; and (3) whether petitioners' taxable income
should be increased in the amount of $7,399 for Social Security
benefits received during 1988.
FINDINGS OF FACT
Vosburg Hotels, Inc. (Vosburg), was incorporated in
Sacramento, California, on September 3, 1985, and it acquired
assets and began doing business on the same date. On November
12, 1985, the shareholders of Vosburg elected to be treated as a
"small business corporation" under subchapter S of the Internal
Revenue Code. At the time of its election, Vosburg had six
shareholders. Petitioners jointly acquired 179,620 shares.
Petitioners' shares were evidenced by stock certificate number
three which was issued to "Oliver Q. Foust and Talietha Foust as
their community property". Al and Susan E. Lemerande also
acquired 179,620 shares, and Mark P. and Ruth Owens acquired
359,240 shares. Petitioners' holdings represented 25 percent of
the corporation's outstanding stock.
1Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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