2
The issues for decision are whether petitioners: (1) Are
entitled to a passthrough loss from a wholly owned S corporation,
and (2) are liable for an addition to tax pursuant to section
6661 for a substantial understatement of tax.
All of the facts have been stipulated. The stipulation of
facts and attached exhibits are incorporated herein by this
reference.
At the time their petition was filed, petitioners resided in
New York, New York.
During 1987, Arun Bhatia (petitioner) was in the
construction business and conducted his business through at least
two entities, including Arun Bhatia Development Corporation
(ABDC) and Ganbir Construction Corporation (GCC), both of which
had elected subchapter S status for 1987. Petitioner was the
sole shareholder and president of ABDC and GCC during 1987. At
the beginning of 1987, petitioner's basis in ABDC was zero.
On October 26, 1987, petitioner executed a document
captioned "Assumption Agreement" (assumption agreement), which
stated in part:
WHEREAS, BHATIA [petitioner] is the sole
shareholder of ABDC; and,
WHEREAS, ABDC is currently indebted to GANBIR
CONSTRUCTION CORPORATION ("GCC") in the amount of
$244,500.00; and,
WHEREAS, BHATIA desires to assume ABDC's
obligations to GCC so as to improve ABDC's capital
structure;
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011