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His wife, Suzanne Yarnell, was not employed outside the home. On
their 1981 Federal income tax return, Marvin and Suzanne Yarnell
reported gross income from wages of $350,000 and total income in
the amount of $374,178. Consequently, in the absence of
significant deductions or credits, they were subject to payment
of Federal income taxes in substantial amounts.
Philip Yarnell was a salesman and 25-percent owner of
Yarnell Fabrics and YFIL during 1981. His spouse, Roberta, was
employed as a travel consultant during that year. On their 1981
Federal income tax return, Philip and Roberta Yarnell reported
gross income from wages of $300,000 and total taxable income in
the amount of $296,787. Consequently, in the absence of
additional deductions or credits, they were subject to payment of
Federal income taxes in substantial amounts.
For an investment of $75,000, Marvin Yarnell acquired a
7.62-percent interest in Plymouth in 1981. As a result of the
passthrough from Plymouth, on their 1981 Federal income tax
return, Marvin and Suzanne Yarnell deducted an operating loss in
the amount of $60,952 and claimed investment tax and business
energy credits totaling $124,034. Respondent disallowed Marvin
and Suzanne Yarnell's claimed operating loss and credits related
to their investment in Plymouth.
Also during 1981, Philip Yarnell acquired a 6.35-percent
interest in Plymouth for an investment of $62,500. As a result
of the passthrough from Plymouth, on their 1981 Federal income
tax return, Philip and Roberta Yarnell deducted an operating loss
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