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made for the 3-month period from November 1991 through January
1992. The S/S/S note was revised during July 1992 when the term
for repayment was extended from 10 years to 15 years, and the
interest rate was reduced from 10 percent to 8 percent.
Following the July 1992 revision, no payments were made during
the period from September through December 1992. During January
1993, the S/S/S note was again revised, and the interest rate was
reduced from 8 percent to 6.5 percent.
Information Reported by SPC-FL and the SPC-FL Shareholders
SPC-FL deducted the interest it paid to SSI. The interest
expense deduction ultimately passed through to the individual
SPC-FL shareholders.17 SPC-FL did not issue Forms 1099 to
report interest paid to the SPC-FL shareholders. On their
respective Federal income tax returns, the SPC-FL shareholders
did not report any interest income from SPC-FL and did not claim
any interest deductions for amounts paid to SSI for taxable years
1990, 1991, or 1992. On their Federal income tax returns, the
Spencers claimed the following losses as Mrs. Spencer's share of
losses from SPC-FL:
Year Amount of Loss Claimed
1990 $50,812
1991 33,255
1992 55,800
17 Mr. Spencer signed all of SPC-FL's Federal income tax
returns for the years in issue in the instant case.
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