- 5 - last annual report was filed with Alabama's secretary of state's office. The sale, in 1993, was reported on petitioner's Federal income tax return, showing no gain because petitioner reported both the sales price and adjusted basis of the property as $33,730. During its life, petitioner did not rent or lease the property to others. It did not keep books, maintain a bank account, or hold regular meetings. Using personal checks and cash, petitioner's shareholders covered the expenditures for repairs and improvements made on the property. Respondent determined in the notice of deficiency that petitioner must include the gain of $112,053 from the sale of the property in its 1993 income but that it was entitled to deduct an unused loss carryover from 1992 of $9,290. Discussion Respondent's determination that petitioner must report its realized gain on the 1993 sale of property is presumed to be correct, and petitioner has the burden of proving otherwise. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 114 (1933). Hooper and Chamblee, as officers of petitioner, argue that they did not intend to incorporate petitioner and did not know, until 1995, that a lawyer friend had, in fact, incorporated it. They contend that petitioner was not a business venture, and its corporate existence should therefore be disregarded. State law determines whether a corporation has been organized. See Stoody v. Commissioner, 66 T.C. 710, 716 (1976);Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011