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CDC’s work product on the Phase II project. On May 28, 1992,
petitioners paid to CDC $42,500 of the Additional Amount.
Petitioners retained $7,500 of the Additional Amount, which they
considered to be an offset of CDC’s share of the legal fees that
petitioners had incurred as a result of the State’s tidelands
easement claim.6
On their 1992 tax return, petitioners did not claim a
deduction for the $642,500 paid to CDC in 1992. Petitioners also
did not report as gross income on any tax return the $57,500
difference between the $700,000 they received from CDC under the
Agreement during 1989 and 1990 and the $642,500 they paid to CDC
pursuant to the Mutual Release in 1992.7
During this entire period, petitioners remained in
possession of Phase II and retained all benefits and burdens of
ownership including liability for payment of taxes and insurance.
It does not appear from the record that CDC ever took possession
of Phase II.
6 The record contains a considerable amount of information
pertaining to events that occurred between petitioners and the
State, and petitioners and First American, after the years at
issue. We do not consider this information to be of any
relevance to the years before the Court.
7 We do not have jurisdiction with regard to 1992. We make
this finding of fact as to 1992 for completeness, but we draw no
conclusions with respect to petitioners’ tax liability for 1992
resulting from this transaction.
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