- 4 -
stated basis of $97, office furniture and equipment with a stated
basis of $241, and insurance premium renewals with a stated basis
of $245,000.
In return, the corporation issued 1,000 shares of stock to
Mr. Bowden. The corporation also assumed a $220,468 liability,
evidenced by a note, that Mr. Bowden had incurred to acquire his
ex-wife's community property interest in the sole proprietorship.
Assumption of the debt by the corporation did not relieve
Mr. Bowden of his primary liability on the note.
Upon incorporation, an account payable of $60,009 was
created on the books of the corporation to pay cash to Mr. Bowden
or pay other personal expenses on his behalf in the amounts of
$15,768, $21,540, and $23,951, for calendar years 1991, 1992, and
1993, respectively.5
Respondent determined deficiencies in the Bowdens' Federal
income taxes for 1991, 1992, and 1993. Respondent determined
that in 1991 the Bowdens had recognized $280,477 in net capital
gain upon incorporation of their business. This gain was
calculated by characterizing as boot the $60,009 account payable
5Although the parties stipulate the yearly amounts paid to
Mr. Bowden, the Court notes that the sum of these three payments
exceeds the $60,009 account payable recorded on the books of the
corporation. It is unclear to what source the additional funds
paid to Mr. Bowden were attributable.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011