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claimed operating losses and credits related to their interests
in SAB Recycling and SAB Associates.
In 1982, Farrell acquired a 4.5-percent limited partnership
interest in SAB Reclamation for $25,000.13 On their 1982 return,
he and his wife Clotilde claimed an operating loss in the amount
of $20,050 and investment tax and business energy credits
totaling $41,856,14 both flowing from his interest in SAB
Reclamation. The Farrells also claimed an operating loss in the
amount of $1,906 with respect to SAB Associates.15 Respondent
disallowed all but $386 of the Farrell's 1982 claimed operating
losses and credits related to SAB Reclamation and SAB
Associates.16
13 Farrell testified that he believed he had invested $20,000.
His Form K-1, Partner's Share of Income, Credits, Deductions,
etc., attached to SAB Reclamation's partnership return, indicates
that he invested $25,000. We note that the $25,000 figure is the
gross amount Farrell invested, unreduced by any rebated sales
commission or his share of any advance royalty distributed to
him.
14 The regular investment tax credit claimed by Farrell and his
wife totaled $21,314, but only $20,928 of that amount was
attributable to SAB Reclamation.
15 As noted, respondent and Farrell stipulated that for taxable
year 1982, he and his wife are entitled to deduct $381 with
respect to their interest in SAB Associates.
16 Respondent explained in the notice of deficiency that
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