- 9 - The loans to the Posas and Navars, in the principal amounts of $15,000 and $10,000, respectively, have been paid. As of the date of filing of the petition, the Fosses still held a note issued by Canterbury on which they were receiving interest payments. As a result of the earlier lawsuit, WSAI turned its books and records over to the South Wood Estates Condominium Association. Petitioner has not recovered the books and records of WSAI from the Association. Corporation tax and transferee issues On or around March 1, 1994, respondent sent petitioner, as transferee of WSAI, a 30-day letter, with a report of income tax examination and explanation of items, asserting for the taxable year 1988 that WSAI had taxable income of $272,320, resulting from gross receipts of $1,068,000 from the sale of the South Wood condominium units,8 based on the retail sales prices as determined by the transfer taxes paid, less costs and expenses of $795,680.9 The report took the position that WSAI owed 1988 U.S. 8Respondent excluded the two units transferred to petitioner from the calculation of gross receipts. 9Respondent relied on the Cohan rule to provide what respondent regarded as a reasonable allowance for costs and other expenses in lieu of substantiating documents. See Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930). Respondent arrived at the $795,680 figure for costs and expenses by allowing $715,000 of construction loan proceeds (cf. our findings supra p. 3), $70,000 as the cost of the land, and $10,680 as expenses of the (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011