Jung Sik Lim & Bok S. Lim - Page 4

                                        - 4 -                                         

          the Branch property.  The utility payments included the portion             
          used by petitioners and others as a personal residence.                     
          Petitioners did not report as rental income on their 1993 Federal           
          tax return Volm’s payments of utility expenses or the real estate           
          taxes.  Petitioners, likewise, did not claim the interest or                
          depreciation paid or incurred in connection with the liquor store           
          business' rental of the Branch property.                                    
               Other than the payment of utilities and taxes by Volm’s,               
          rent payments were not made during the 1992 or 1993 tax years               
          because of Volm’s startup cash-flow problems.  Beginning in 1994,           
          Volm’s began paying $3,000 monthly rent payments to petitioners.            
               The purchase price of the Branch property was $700,000, and            
          petitioners incurred settlement costs of over $60,000.  The                 
          purchase price of the property was allocated 57 percent to the              
          land and 43 percent to the building.  Petitioners obtained an               
          $800,000 Small Business Administration loan (SBA loan) to                   
          purchase the Branch property.  The seller of the Branch property            
          retained a security interest in the property to secure seller-              
          financed debt of $280,000.  Although the sister-in-law was                  
          designated as a purchaser, she did not contribute any money                 
          toward the purchase of the Branch property and did not make any             
          mortgage payments on the loans secured by the property.  During             
          1993, petitioners made interest payments of $69,193.40 and                  
          $21,163.68 on the SBA and seller-financed loans, respectively.              





Page:  Previous  1  2  3  4  5  6  7  8  9  Next

Last modified: May 25, 2011