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brief that the interest be characterized and allocated in the
following pro rata manner:
Percent of FMV of
each asset in 1987
Character divided by FMV of 1992 1993
Asset of Interest total assets Interest Interest
Class A stock1 Investment 41.0% $21,049.10 $17,388.40
Class B stock2 Investment 15.0 7,700.89 6,361.61
Palm Beach house3 Qualified 13.2 6,776.78 5,598.22
residence
Rental real estate Passive 15.4 7,906.25 6,531.25
in Selma, Alabama4 activity
Rental real estate Passive 15.4 7,906.25 6,531.25
in Denver, Colorado5 activity
Total 100.0% $51,339.27 $42,410.73
1The Class A stock consisted of 160 shares in Pepsi-Cola Bottling Co. of
Selma, Inc., which petitioner valued at $466,720.
2The Class B stock consisted of 73 shares in Pepsi-Cola Bottling Co. of
Selma, Inc., which petitioner valued at $170,382.
3The residence located in Palm Beach Gardens, Florida, was valued at
$300,000. This residence was encumbered by a mortgage securing a preexisting
debt with a remaining balance of $47,878.
4The land and building located in Selma, Alabama, was valued at $350,000 and
leased to the Pepsi-Cola Bottling Co. of Selma, Inc. According to the property
settlement agreement, this land was encumbered by a mortgage securing a debt in
the amount of $87,356.
5Petitioner testified that he purchased a rental house in Denver, Colorado,
in 1984 for $354,000. This property was titled in petitioner's name prior to his
divorce.
We have several concerns regarding petitioner's proposed
allocation. First, petitioner does not allocate the interest
among all assets he received from Mrs. Seymour in accordance
10(...continued)
whether a particular method of allocating debt proceeds
used to purchase an interest in or to make a capital
contribution to a passthrough entity is reasonable
depends on the facts and circumstances including,
without limitation, whether the taxpayer consistently
applies the method from year to year.
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