5
and for petitioner personally. The credit line funds went
directly into DRPC's account, and any proceeds petitioner used
were drawn out of DRPC.
Petitioner apparently did not make any repayments on the
notes to Frost Bank; DRPC may have made the only principal
payments on the notes. In 1989, pursuant to the guaranty
agreement, Don Test apparently paid the balance of the notes.
Petitioner contributed $6,000 in capital to the formation of
DRPC in 1984. Petitioner contributed an additional $11,045 to
DRPC during 1984. The parties have stipulated that petitioner's
basis in DRPC as of December 31, 1984, was $5,362.
During 1985, without considering the disputed loans to DRPC
from Frost Bank, the net effect of petitioner's withdrawals and
contributions to capital was a withdrawal of $801. Petitioner
claimed losses of $37,890 from DRPC. Such losses were not
contested by respondent, causing losses in excess of basis as of
December 31, 1985, of $33,329.
Excluding respondent's disallowed Frost Bank loans, the net
effect of petitioner's withdrawals and contributions for 1986 was
a contribution of $43,579. Petitioner claimed a loss of $23,942
from DRPC, which respondent did not contest. There was
accordingly a loss in excess of basis at December 31, 1986, of
$13,692.
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