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the 1983 amount for lack of substantiation and business
purpose. For 1982 and 1983, Great deducted $530,667 and
$351,983 in net operating loss carryover deductions from the
FYE July 31, 1982. Respondent disallowed the claimed loss
deductions because Great had been the subject of an audit for
years prior to those now before the Court. In a case involving
the prior years which was pending before this Court, the same
net operating losses were eliminated due to the parties' agreed
settlement. Great had agreed to an income tax deficiency,
rather than a loss, in the earlier case.
ULTIMATE FINDINGS OF FACT
1. Service, for each of its 3 taxable years, is entitled to
deduct 20 percent of the costs and expenses connected with the
business use of the Johnsons' residence (condo) including the
utilities, with the exception of the cost of telephone service,
for which Service is entitled to deduct 75 percent for 1982 and
1983 and 100 percent for 1984. Service is also allowed to
deduct 20 percent of the condominium association fees, rather
than the 10 percent allowed by respondent.
2. Service is not entitled to deduct any expenses,
depreciation, or other claimed amounts connected with the beach
condo, including decorating and furnishing expenditures and
association and condo fees. The $1,057 that Service claimed
for 1983 as "Mortgage Service Expense" for closing costs on the
beach condo is not deductible.
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