- 4 - taught one client, a Mr. Labruzzo, how to operate one of the boats. Petitioner reported his corporation's lease payments for the boats as rental income on Schedule E of his individual Federal income tax returns, against which he deducted expenses relating to the boats, including repairs, maintenance, insurance, interest, taxes, docking fees, and depreciation. Petitioner's corporation deducted the boat lease payments on its Federal corporate income tax returns. For its fiscal years, which ended May 31, the corporation reported boat lease expenses in 1990 of $57,995, in 1991 of $15,816, and in 1992 of $110,714 and deducted 80 percent of these amounts, pursuant to section 274(n). For the same years it reported 1990 income of $40,346, a 1991 loss of $218,390, and income in 1992 of $136,162. Respondent accepted petitioner’s treatment of the boat lease payments and related expenses on Schedule E of his individual returns, but disallowed the corporation's deductions of the lease payments for the years in issue. The disallowances increased the corporation’s income, or decreased its losses, by the amounts disallowed. Because an S corporation's income and losses are passed through to its shareholders, the effect of the disallowances was to increase the income, or decrease the loss,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011