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statements bear a heading that reads “DISCLOSURE PURSUANT TO
SECTION 6661". The disclosure statements explain that Mary
Catherine is writing down land and carrying costs to fair market
value pursuant to section 1.471-4, Income Tax Regs. The
disclosure statements also provide a complete detailed
description of the subject land and the prevailing conditions in
the real estate market. Attached to the disclosure statements
are the appraisals petitioner had obtained, as well as other
information about the two communities.
During 1992, prior to initiation of the audit that resulted
in respondent’s determinations, and for reasons independent of
the issues in the lawsuit, discussed infra pp. 12-13, Mary
Catherine terminated Bobrow as its accountants and hired Kostin
Ruffkess & Co., C.P.A.’s (Kostin) of West Hartford, Connecticut.
Kostin, which prepared Mary Catherine’s 1991 Federal income tax
return, advised petitioner that land could not be written down
for Federal income tax purposes.
Since its date of incorporation, Mary Catherine has neither
requested nor received the Commissioner's consent to change
accounting methods.
Petitioners' Tax Returns
The Ridge writedown resulted in a loss to Mary Catherine
that flowed through to petitioner and was claimed by petitioners
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Last modified: May 25, 2011