Wallace R. Noel and Robinette Noel - Page 8

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                    2In his 1990 Federal income tax return, petitioner                
               included $800,000 in contingent legal fees in the basis                
               of his stock.  In the brief, petitioners admit that                    
               this was in error, and that the contingent portion of                  
               the fees amounted to only $500,000; thus, the $300,000                 
               actually paid by petitioner was reported twice on his                  
               Federal income tax return.  Accordingly, we will                       
               discuss this issue using the $500,000 amount as                        
               conceded by petitioner.                                                

               The difference between $1,969,740 (amount received for                 
          shares of PMI stock) and $1,469,309 was reported in petitioner's            
          1990 Federal income tax return as a long-term capital gain of               
               Respondent, in her notice of deficiency, determined that the           
          $3,250,071 received from PepsiCo was paid as consideration for              
          petitioner's PMI stock, and no amounts were excludable under                
          section 104(a)(2).  Further, respondent limited petitioner's                
          basis in the PMI stock to the $200,000 initially invested by                
          Investment Interest Expense                                                 
               Petitioner deducted $156,441 as investment interest expense            
          in his 1990 Federal income tax return and reported $1,224,395 as            
          an investment interest expense carryforward.  These amounts                 
          related to petitioner's various loans from the bank.                        
               Petitioner borrowed money from the bank on various dates               
          throughout the 1980's.  In return, petitioner executed promissory           
          notes in favor of the bank, secured by petitioner's PMI stock and           
          the assets of several other business ventures controlled by him.            

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