- 13 -
the Spencers did not report any interest income from SPC-SC and
did not claim any interest deductions for amounts paid to SSI or
SCNB.
SPC-SC's corporate returns, Forms 1120S, did not reflect any
amount on Schedule L as "loans from shareholders" for taxable
years 1990, 1991, or 1992. The debts SPC-SC incurred in
purchasing the assets from Mr. Spencer and Mr. Boozer were
reflected on Schedule L as "mortgages, notes, and bonds payable
in 1 year or more."12 SPC-SC's Schedules L, for taxable years
1990, 1991, and 1992, reflected that its capital stock was $1,000
and that its paid-in capital was zero. SPC-SC did not list the
bank loan on its books as a capital contribution.
SPC-FL Transaction
Three years later, in a similar series of transactions, SSI
nominally sold its Florida assets and operations to Mrs. Spencer,
the Schroeders, and Lewis Smith (the purchasers) for $1,150,000.
The purchasers subsequently nominally conveyed those same assets
to a newly organized S corporation, SPC-FL, for $1,150,000. As
in the case of the SPC-SC transaction, Mr. Spencer caused SSI to
12 The amounts reflected on SPC-SC's Schedules L as "mortgages,
notes, and bonds payable in 1 year or more" are as follows:
Year Beginning of Tax Year End of Tax Year
1990 $1,246,569 $1,170,308
1991 1,170,308 1,161,981
1992 1,161,981 1,170,119
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