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property. Good Shepherd did not operate a nursing home or other
medical facility in any of the years in issue.
For 1986, 1987, and 1988, Good Shepherd reported small
amounts of income, received either from the sale of livestock
raised on the property or timber harvested from the property. No
income was reported from individuals residing on the property.
The elderly individuals residing on the property when it was
acquired from Ona remained in residence until at least 1987. The
obligation to provide room and board to those individuals was
assumed as part of, and reduced proportionately, the purchase
price of the property.
For 1986 through 1988, Good Shepherd made its returns of
income on Form 1120S, U.S. Income Tax Return for an
S Corporation. For 1986 and 1988, Good Shepherd entered the
description "Nursing home" on the line requiring a description of
its business activity. For 1987, it left that line blank. Good
Shepherd reported income of $7, $486, and $697 for 1986 through
1988, respectively. Good Shepherd claimed the following
deductions for 1986 through 1987:
Interest Other
Year Expense Depreciation Deductions Tax Repairs
1986 $110,013 $57,167 $311,106 --- ---
1987 130,952 49,011 89,299 --- ---
1988 119,430 44,258 133,618 $66 $2,102
Good Shepherd itemized its "Other Deductions" for 1987 and 1988, as
follows:
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