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Item Amount
Interest income $22,129
Dividend income 1,176
Long-term capital gain 70,8864
Real estate taxes (2,135)
Personal property tax (38)
Miscellaneous (462)
Net investment income $91,556
H. The $38,500 Wise Received From WRI
During 1988, Wise received $38,500 in checks from WRI. WRI
treated the $38,500 as loan repayments to Wise. WRI did not
deduct the $38,500, and Wise did not include the $38,500 in gross
income in 1988. WRI has never deducted officers' compensation.
OPINION
Respondent's determinations regarding petitioners' 1988 tax
returns primarily relate to three events: (1) The 1984 land sale
from Hersco to WRI and subsequent transactions, (2) Wise's
management of WRI, and (3) WRI's pass-through losses.
Petitioners dispute all of respondent's determinations.
Respondent's determinations are presumed correct, and petitioners
bear the burden of proof. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933).
A. 1984 Land Sale From Hersco to WRI and Subsequent
Transactions
On August 14, 1984, Hersco sold unimproved land with a basis
of about $134,000 to WRI for $1,468,000. At the closing, WRI
4Wise’s flow-through portion of Hersco's long-term capital
gain is $70,886 (37.5 percent of $189,014).
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