Barry B. Bealor and Nancy L. Bealor, et al. - Page 91

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          unpaid portions of the compensation fee.                                    
               Thus, Machise was not required to, and did not, make any               
          payment of the "compensation fee" to MIT 82 during 1982.  MIT 82,           
          under its cash method of accounting, accordingly reported a net             
          loss of $2,488,164.  This loss was the excess of the $2,504,865             
          payroll costs and other expenses over reported partnership                  
          interest income of $16,701.                                                 
          Individual Petitioners' Deductions of Partnership Loss                      
               On their individual income tax return for 1982, the Bealors            
          reported a loss of $80,915, representing their 3.252-percent                
          share of MIT 82's partnership loss.  James Cameron reported the             
          same amount as his 3.252-percent share of those losses in his               
          1982 Federal income tax return.  Frank Pettisani, in his 1983               
          return, reported a Schedule E loss of $161,830, representing his            
          6.504-percent share of MIT 82 losses.  The other investors in MIT           
          82 also reported Schedule E partnership losses from MIT 82, in              
          proportion to their interests.                                              
               Respondent issued statutory notices of deficiency to the               
          named investors and the other investors, disallowing the claimed            
          MIT 82 losses for 1982.                                                     
          Intercoastal's Deduction of Compensation Fee                                
               For the 6-month period January 1, 1982, to the end of its              
          fiscal year on June 30, 1982, Machise/Intercoastal accrued and              
          deducted, as "rents" for Federal income tax purposes, $1,389,950            
          with respect to payroll costs.  For the next 6-month period of              




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