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$11,374, and his indebtedness to INI was increased by that same
amount.
When Carlsgate went out of business in 1991, petitioners
each reported one-half of the remaining loan balance, $5,131
(total $10,262), as long-term capital gain income from the
exchange of their stock.
Through a series of similar assumptions and transfers
executed by journal entries, on December 31, 1991, petitioner was
indebted to INI, his sole remaining corporation, for $980,527.
Issue 1. Whether Petitioner's Withdrawals From Development in
1989, 1990, and 1991 Were Taxable Distributions
Respondent determined that Development made distributions to
petitioner that exceeded his stock basis by $298,622, $261,591,
and $224,827 for 1989, 1990, and 1991, respectively. In
addition, respondent determined that in 1989 petitioner received
$8,854 of dividends that Development distributed from its C
corporation accumulated earnings and profits. Petitioner asserts
that with respect to all of the years at issue, the withdrawals
were loans that Development made to him.
1989
On January 1, 1989, Development had $8,854 of accumulated
earnings and profits on its books and records that it earned when
it was a C corporation. According to the loan summary prepared
by petitioner's accountants, the 1989 beginning balance in
Development's loans to shareholder account was $427,368.
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