Andrew and Margita Zards et al. - Page 1


          T.C. Memo. 1995-497                                                         

                               UNITED STATES TAX COURT                                

               ANDREW ZARDS AND MARGITA ZARDS, ET AL.,1 Petitioners v.                
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket Nos. 20388-91, 20389-91,    Filed October 16, 1995.             
                         20390-91, 2277-93.                                           

                    GS is an S corporation, and Ps' claimed losses                    
               passed through from GS.  R disallowed Ps' losses on                    
               various grounds including Ps' failure to (1) establish                 
               that the losses were incurred in a trade or business                   
               for the production of income and (2) substantiate that                 
               the expenses giving rise to the losses actually were                   
               incurred or paid.                                                      
                    Held:  R's disallowance is sustained.  Ps failed                  
               to prove that GS was carrying on a trade or business                   
               during the years in issue and that GS ever incurred or                 
               paid its claimed expenses.                                             
               Victoria M. Brown, for petitioners.                                    
               Diane R. Mirabito, for respondent.                                     

          1    Cases of the following petitioners are consolidated                    
          herewith:  Janet Weinman, docket No. 20389-91; Vincent Donahue,             
          docket No. 20390-91; and Valdis and Vaida Vipulis, docket No.               

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