LB&M Associates, Inc., Rudy J. Alvarado, Tax Matters Person - Page 4

                                         -4-                                          
          FSAA.  Paragraph 5 of the amended petitions in these cases                  
          alleges in pertinent part:                                                  
               Petitioner * * * disputes the determination of the                     
               Commissioner regarding the basis of the individual                     
               shareholders in the stock of Petitioner.  The dispute                  
               here does not arise from the adjustments to income and                 
               expenses at the corporate level.  The dispute arises in                
               the computation of the basis of the individual share-                  
               holders in their stock.  This computation of basis at                  
               the shareholder level in turn determines the amount and                
               timing of the loss amounts deductible to the sharehold-                
               ers.                                                                   

                        *     *     *     *     *     *     *                         
               The Commissioner erred in failing to include in the basis              
               computation the amount of money loaned to Petitioner by                
               certain individual shareholders of Petitioner during calen-            
               dar year 1990.                                                         

                        *     *     *     *     *     *     *                         
               The basis computation used by Commissioner at the share-               
               holder level does not include an increase to basis as a                
               result of these loans.                                                 
          The amended petition in docket No. 1609-96 relating to 1990 also            
          alleges:                                                                    
               All of the * * * adjustments except * * * Shareholders                 
               [sic] Capital Gain on Cash Distributions in Excess of                  
               Basis, (in the amount of $87,935) are agreed.                          
               (b)  Petitioner disputes the said amount [relating to                  
               the shareholders' capital gain] * * *. * * *                           
               On June 20, 1997, the Court permitted Mr. Alvarado (current            
          tax matters person) to replace Mr. Doerfel as the tax matters               
          person in these cases.                                                      







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