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The common denominator in these consolidated cases is the
claim of tax losses arising from an investment in Good Shepherd
Home, Inc. (Good Shepherd), an S corporation within the meaning
of section 1361. We must determine whether such losses are
allowable, and, if not, whether petitioners are liable for the
additions to tax determined by respondent.2
FINDINGS OF FACT
Introduction
Some of the facts have been stipulated and are so found.
The stipulation of facts filed by the parties and the
accompanying exhibits are incorporated herein by this reference.
Petitioners Andrew and Margita Zards are individuals who made a
joint return of income for 1986 and who resided in Lisle,
Illinois, at the time their petition was filed. Petitioner
Andrew Zards became a shareholder of Good Shepherd on March 17,
1986. Petitioners Janet Weinman and Vincent Donahue are
individuals who resided in New York, New York, at the time their
petitions were filed. Petitioners Weinman and Donahue both
2 We need determine no deficiency for petitioners Vipulis for
1985. Their losses from Good Shepherd Home, Inc., for that year
were subchapter S items, within the meaning of sec. 6245. The
tax treatment of those items is determined at the corporate
level. See sec. 6242. The proper treatment of those items was
the subject of a proceeding before this Court: Good Shepherd
Home, Inc., Valdis Vipulis, Tax Matters Person v. Commissioner,
docket No. 28415-89. Our decision in that case resulted in the
disallowance of substantially all of the losses from Good
Shepherd Home, Inc., claimed by petitioners Vipulis for 1985. We
must still, however, decide the additions to tax.
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