- 78 -
On their individual income tax returns for 1986, the nine
investors in MIT 86 reported Schedule E partnership losses from
MIT 86 in proportion to their interests.
Respondent issued a notice of final partnership
administrative adjustment to MIT 86, in which respondent
disallowed the entire claimed MIT 86 partnership loss of
$3,850,000 for the year 1986.
For the period January 1 through June 30, 1986, Machise/
Intercoastal accrued and deducted, on its consolidated income tax
return, "rents" of $1,925,000.
Respondent issued a statutory notice of deficiency to
Intercoastal disallowing Intercoastal's claimed deduction for
fiscal year June 30, 1986, of those parts of its rents paid to
MIT 86 that represent 20 percent of the compensation fee under
the employee leasing agreement, the management fee expense, and
the interest expense.
MIT 86 closed its bank accounts early in 1986. Like the
other partnerships, in its subsequent years MIT 86 engaged in
noncash transactions, made by issuing, endorsing, and canceling
notes, and recorded by journal entries. Thus, MPC issued MIT 86
(...continued)
all its invested capital, notes of $3,080,000 plus cash of
$770,000, to Machise. The $133,476 excess of the amounts
allegedly advanced to MIT 86 over the $3,850,000 advanced by MIT
86 was recorded as a prepayment of the compensation fee on
Dec. 31, 1986.
Page: Previous 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 NextLast modified: May 25, 2011