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report the following amounts of income and expense which had
originally been reported by Imperial:
LaVern Loren
Scherping Scherping
1984
Farm gross income $306,922 $303,922
Farming expenses (194,874) (194,874)
Depreciation (63,334) (63,334)
1985
Farm gross income 309,258 306,258
Farming expenses (173,110) (173,110)
Depreciation (59,785) (59,785)
1986
Farm gross income 303,939 300,939
Farming expenses (155,355) (155,355)
Depreciation (40,870) (40,870)
In making this determination, respondent recomputed and
annualized Imperial's income and expenses from its fiscal years
to petitioners' calendar years. In calculating depreciation,
respondent eliminated a basis step-up purportedly derived from
petitioners' sale of assets to Imperial. Finally, respondent
allocated the income and expenses between petitioners, 50 percent
to LaVern Scherping and 50 percent to Loren Scherping, with
appropriate allowances for farm-related income each petitioner
had previously reported. In determining petitioners' incomes,
respondent did not allow any deduction for interest expense
Imperial had claimed as a deduction on its returns.
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Last modified: May 25, 2011