Craig A. Houghton, for petitioners.
Mary P. Kimmel, for respondent.
MEMORANDUM OPINION
NIMS, Judge: Respondent determined a $172,967 deficiency in
petitioners' 1989 Federal income tax. The deficiency results
from respondent's determination that petitioners realized a
$566,806 gain on the transfer of certain properties to their
wholly owned corporation, and the resulting arithmetically
required reduction in the deductible amount of a conceded
casualty loss.
Since the parties agree that the deductible amount of
petitioners' casualty loss will follow from the resolution of the
property transfer issue, the sole issue for decision is whether
petitioners must recognize gain on the transfer under section
357(c). Petitioners agree that they are entitled to no deduction
for their casualty loss if respondent's determination is
sustained on the section 357(c) issue. Unless otherwise noted,
all section references are to sections of the Internal Revenue
Code in effect for 1989, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
The parties submitted this case fully stipulated, and the
facts as stipulated are so found.
Petitioners were residents of Fresno, California, at the
time they filed their petition. During the year at issue,
petitioners owned 100 percent of NAC Corporation, a Nevada
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