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section 166.1 The remainder of respondent’s determination, the
1992 net operating loss (NOL) carryforward and a charitable gift
deduction, is purely computational adjustments caused by the
reduction of petitioner’s ordinary loss deduction and the
corresponding increase in income.
Respondent contends that the extension of credit to
corporations wholly owned by petitioner’s sole shareholder
constituted equity investments in those companies. As such,
respondent argues that the corporations’ subsequent failures
resulted in capital rather than ordinary losses for petitioner.
Petitioner counters that the lines of credit were valid debt
incurred by the corporations, and the corporations’ inability to
repay the debt created an ordinary loss for petitioner under
section 166.
FINDINGS OF FACT
The stipulation of facts and the exhibits attached thereto
are incorporated herein by this reference.
Petitioner Cerand & Company, Inc., offers consulting
services concerning the operation of airport parking lots.
Petitioner was located in Washington, D.C., at the time the
petition in this case was filed. Petitioner’s president is
1 Unless otherwise stated, all section references are to
the Internal Revenue Code in effect for the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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Last modified: May 25, 2011