- 4 -
a model home that was used to demonstrate the features that could
be incorporated in the homes it constructed. Associates also
owed $40,000 to trade creditors with respect to a house under
construction. Associates' assets were otherwise unencumbered at
relevant times. Associates' income tax return for its fiscal
year ended September 30, 1981 (1980 corporate return), reported
that debts due its officers increased from $3,006.86 for the year
ended September 30, 1980, to $126,008.16 for the year ended
September 30, 1981.
During 1982 and 1983, petitioner devoted his time to a
travel business rather than to the building business, but by 1985
the housing market had revived sufficiently to cause petitioner
to resume Associates' business of building houses. On March 24,
1988, Associates paid petitioner $117,164.91 of its funds, which
were deposited into an investment savings account in petitioner's
name (hereinafter sometimes referred to as the 1988
distribution). The distribution represented the proceeds of a
closing on a house sold by Associates. The distribution was made
because Associates was doing well and did not need the money.
Petitioner considered that the amount of the distribution
approximated the amount he thought was due him from Associates.
The funds were pledged as collateral for a line of credit in
favor of Associates. Petitioner did not report the distribution
as income on his 1988 income tax return because he considered it
the repayment of a debt owed him by Associates.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011