- 14 -
consistently retain real estate agents to assist in the
sale of its properties.
Mr. McKelvey also told respondent's agent during the
audit that most of the persons who had purchased any of
petitioner's properties had previously been tenants and he
knew them to be good payors so that it required very little
effort to collect payments from them after the purchase.
Furthermore, Mr. McKelvey told the agent that petitioner's
operating expenses related to the rental properties.
In the subject notice of deficiency, respondent
determined that during each of the years in issue,
petitioner was a personal holding company, as defined by
section 542. The notice of deficiency states as follows:
Since over 50 [sic] percent of your adjusted
ordinary gross income reported for the taxable
years 1989, 1990, 1991, 1992, 1993, and 1994
was from dividends, rents and interest, you
qualified as a personal holding company as
defined by Section 542 of the Internal Revenue
Code. Therefore, you were subject to the
personal holding company tax imposed by Section
541 of the Code.
Respondent also disallowed a portion of the deductions
claimed by petitioner for the years 1992 and 1993 on the
ground that the total deductions claimed for each of those
taxable years exceeded the income from petitioner's passive
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011