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respondent also affected the amount of the carryback to 1988.
Petitioners’ reported 1988 tax liability was reduced from
$547,702 to $293,598.
In 1991, petitioner lent Mary Catherine $2,467,094,
increasing his adjusted basis and his amount at risk by that
amount. This enabled petitioner to claim a deduction from
ordinary income for a nonpassive loss on his 1991 income tax
return in the amount of $2,467,094, resulting from the Ridge and
Minnechaug writedowns.
Petitioner filed an Application for Tentative Refund for
1991 claiming an NOL carryback to 1988 that resulted in
petitioners’ 1988 income tax liability being further reduced from
$293,598 to $19,851.6
Petitioner attached a letter dated March 2, 1992, to his
1991 Application for Tentative Refund asking respondent to
expedite the refund. The letter referred to significant
operating losses experienced by petitioner's companies since
1988, cash-flow problems, banking problems, delinquent payments
to vendors, lay-offs, and reduced compensation to employees. The
letter stated that “receipt of the refund * * * [was] critical
and the potential key to * * * [petitioner's] survival.”
6 Petitioners’ 1988 income tax liability would have been
reduced below $19,851 but for the limitation imposed by the
alternative minimum tax.
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