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The information set forth on the income tax returns filed by
Garry’s estate for its fiscal years ended in February 1980
through February 1994 establishes the maximum net amount of funds
spent by the family farm during 1979-93 that was not generated by
the farm itself. This amount is referred to as the “net cash
needs” of the family farm during 1979-93.
The family farm used the cash method of accounting.
Therefore, the family farm generated funds during 1979-93 in
amounts corresponding to the items of farm income reported on the
income tax returns of Garry’s estate.
Neither petitioner nor respondent has claimed that the
family farm information reported on the tax returns of Garry’s
estate is inaccurate. In addition, petitioner has not identified
any unreported deductible expenditures of funds by the family
farm during 1979-93. As a result, all deductible expenditures of
the family farm during 1979-93 are included in the net tax loss
of $481,577 reported on the income tax returns of Garry’s estate.
With respect to the nondeductible expenditures of the family
farm during 1979-93, the family farm did purchase some farm
equipment (and other depreciable property) after Garry's death.
However, the farm stopped purchasing equipment in the early
1980's. As a result, the cost of the depreciable property
acquired by the family farm after Garry’s death (and not
subsequently sold by the farm) was recovered by the farm via the
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