-13-
Of the $307,976,7 respondent determined that $8,854 was a
dividend paid from the C corporation accumulated earnings and
profits, $500 was a nontaxable return of petitioner's stock
basis, and the $298,622 balance was capital gain income.
Respondent adjusted the balance of the loan account to
reflect the determinations; that is, respondent recalculated the
balance to reflect the repayments of the prior year's loans but
did not increase the balance for the alleged loans made to
petitioner during the current year nor reduce it for petitioner's
alleged assumption of Development's debts. The ending loan
account balance calculated by respondent was $36,173; the balance
on Development's records was $88,077. Thus, the ending loan
balance calculated by respondent was less than the balance on
Development's books and records. Finally, respondent adjusted
Development's AAA to restore the correct balance, $76,000, as
reported on Development's amended return.
1990
Respondent allowed $527,318 of the debits (increases) that
were recorded in the account during 1990 and disallowed $22,259.
Respondent allowed $301,900 of the credits (decreases) that were
recorded in the account and disallowed $681,706.
Among the disallowed amounts were $479,035 of credits
recorded for petitioner's alleged assumption of Development's
7 This amount is the sum of petitioner's cash withdrawals and
his indebtedness to Winterchase.
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