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Education 1,461
Repairs 15,529
Supplies 235
23568,899
Total 77,084 79,632
Petitioner has substantiated $47,144, $51,007, and $38,661 of the expenses for
the years 1986, 1987, and 1988, respectively. In addition, respondent has
conceded that $7,767, $5,591, and $8,569 of the expenses are deductible on
Schedule A of the 1986, 1987, and 1988 returns, respectively, subject to
limitations (i.e., personal interest. Sec. 163(d)(6)(B)).
Relationship Between Petitioner And Gilbert
Petitioner and Dr. Alton L. Gilbert (Gilbert) met in 1968. They had a
close personal relationship for many years, and a business relationship during
many of those years. Gilbert and his wife were also members of petitioner's
ministry for 20 years.
Twenty-First Century Corporation (TFC)
TFC was formed in 1979. Petitioner, Gilbert, and their wives owned the
stock in TFC. Petitioner never contributed money or property to TFC, only
services. TFC elected Subchapter S status from its inception. TFC's original
business (to grow and sell pine trees) failed. Gilbert had some experience
with computers so TFC entered the computer services business. TFC's computer
business was sold to Technical Services, Inc., effective April 1, 1984.
Technical Services, Inc. (TSI)
TSI was incorporated on August 18, 1983. It elected subchapter S status
effective January 1, 1984. TSI was also in the business of providing computer
services. The principal shareholders of TSI were Gilbert and Mr. John Robbins
(Robbins).
Sale Of Assets From TFC To TSI
In 1983 and 1984, TFC furnished computer services for TSI's clients.
TFC and TSI attempted to form a joint venture called Systech Management to
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