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Corporation 1989 1990 1991
FGE $243,682 $291,930 $10,615
TTI 152,838 16,259 --
BEL -- -- 40,503
Total $396,520 $308,189 $51,118
Petitioners do not dispute respondent's determination that these
expenses were improperly deducted by the corporations or that the
amounts are taxable income to them. Most, but not all, of the
above expenses for FGI and TTI related to Mr. Garrett's
personally owned muscle cars. Additionally, the expenses
disallowed to BEL were checks that were written by or for Mr.
Garrett.
Muscle Cars
1. 1989 Sale
Prior to 1989, Mr. Garrett collected muscle cars as a hobby.
In January 1989, Mr. Garrett sold 25 automobiles from his muscle
car collection for $1.2 million.3 On their Federal income tax
return for 1989, petitioners claimed a basis of $800,000 in the
muscle cars sold. In the notice of deficiency, respondent
determined that petitioners failed to demonstrate that they were
entitled to any basis in the capital assets sold and, therefore,
realized a gain of $1.2 million from the sale of the muscle cars.
3After this sale, Mr. Garrett had 10 muscle cars remaining
from his original collection.
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Last modified: May 25, 2011