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Background
At the time the petition was filed, Burton C. Boothby
(petitioner) resided in Denver, Colorado, and St. Charles
Investment Company (St. Charles) had its principal place of
business in Englewood, Colorado. St. Charles filed its 1991 U.S.
Income Tax Return as an S corporation with the Internal Revenue
Service at Odgen, Utah.
Prior to 1991, St. Charles was a closely held C corporation
as defined under section 469(j)(1). St. Charles operated rental
real estate giving rise to PAL's under section 469 in 1988, 1989,
and 1990. St. Charles elected S corporation status effective
January 1, 1991. Immediately prior to the effective date of the
S corporation election, St. Charles had suspended PAL's from its
real estate activities.
During 1991, St. Charles disposed of certain of the rental
properties (the properties). St. Charles reported the sales of
the properties and deducted the suspended PAL's arising from the
properties on its 1991 S corporation tax return. Six of the
seven properties sold produced losses of $9,237,752; the seventh
produced a gain of $6,161.
A portion of the suspended PAL's was attributable to
depreciation for which St. Charles had adjusted the bases of the
properties. St. Charles used these adjusted bases in calculating
its gain or loss from the sales of the properties.
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Last modified: May 25, 2011