Shigenori Kudo and Motomi Kudo, et al. - Page 26

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          amount of $13,850, and "Disallowed investment interest expense"             
          in the amount of zero.  The Takaos reported "Deductible                     
          investment interest" in the amount of $13,850 on Schedule A--               
          Itemized Deductions for 1991, purportedly based on imputed                  
          interest on a loan from Hada.11                                             
               Throughout their association, Yoshinori was involved in                
          several financial dealings with Nakamura, and he trusted and                
          relied on Nakamura.  Yoshinori delegated many of his financial              
          affairs to Nakamura.  Nakamura is listed as a signatory on the              
          Takaos' business checking account.  He prepared the Takaos' tax             
          returns for the years 1988 through 1991 as well as Toraya's tax             
          returns for the same years.                                                 
               The Takaos' 1988 tax return was filed October 3, 1990.                 
          Respondent granted the Takaos an extension to file their 1988 tax           
          return until October 15, 1989.                                              
          Facts Relating to Toraya                                                    
               When it filed its petition, Toraya maintained its principal            
          place of business in San Francisco, California.  Toraya was an              
          accrual basis taxpayer.                                                     
               In 1985, Toraya began changing its restaurants' menus from             
          standard sitdown restaurant fare to sushi bar fare.  However, the           
          restaurants did not maintain a straight sushi bar menu.  At that            
          time, the sushi bar concept was known in Japan, but not common in           


               11  There is no evidence that any interest was in fact paid,           
          that it was declared by Hada, or whether it would have qualified            
          as investment interest.                                                     



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