- 12 -
combination with the Mid-Continent corporations. Those
corporations were intended to generate capital for the purchase
of an insurance company, but evolved into shells for a Ponzi
scheme.
Petitioners have agreed that they failed to report $81,000
of income for 1983. Petitioners, however, contend that they are
entitled to deduct expenses of the Mid-Continent corporations
that were paid during and after the corporations ceased
operation. To the extent those amounts were paid, payment was
made with checks from petitioner's S corporation and petitioners
seek to deduct the amounts on their individual 1983 income tax
return. Finally, petitioners contend that they are entitled to a
$90,000 deduction for their 1983 tax year in connection with the
purchase and disposal of Riley. This amount has been
characterized as a refund or repayment to the Mid-Continent
corporations of the preincorporation payments petitioner had
received during 1982. We address each of these matters
separately.
Payments of the Mid-Continent Corporations' Expenses--
Petitioner admits that he failed to report $81,000 ($60,000 plus
$21,000) of income from the Mid-Continent corporations for 1983,
but contends that he paid corporate expenses which more than
offset the $81,000 of unreported income. No deduction for such
expenses was reported or claimed on his 1983 return.
First, it must be noted that the payments proven by
petitioners total about $78,000. In that regard, about $33,000
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011