Srichai and Pusadee Rungrangsi - Page 7

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               Respondent also determined that petitioners were not entitled          
          to claimed investment interest expense deductions for 1992 and              
          1993.  Finally, respondent determined accuracy-related penalties            
          pursuant to section 6662 for each of the years in issue and                 
          additions to tax pursuant to section 6651(a) for petitioners'               
          failure to timely file their tax returns for each of the years in           
          Issue 1.  Sale of Restaurant                                                
               The first issue for decision concerns the nature of the                
          transfer of Stanton Mexicatessen to Ms. Eagatatt, that is, whether          
          petitioners sold the assets of the restaurant to Ms. Eagatatt, as           
          petitioners assert, or merely gave her a security interest in the           
          assets of the restaurant, as respondent maintains.                          
               Preliminarily, we note that although petitioners reported the          
          sale of the restaurant on their 1994 tax return, the transaction in         
          fact occurred on September 15, 1993. (Petitioners maintain they             
          reported the loss from the purported sale of the restaurant on              
          their 1994 tax return on the advice of their accountant.)  Because          
          the transaction occurred in 1993, petitioners are not entitled to           
          the loss in 1994, and we sustain respondent's determination for             
          that adjustment for that year.   See sec. 165(a).  However, because         

               2    Other adjustments in the notice of deficiency relating            
          to self-employment taxes are computational and not in dispute.              

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