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Additions to Tax Penalty
Year Deficiency Sec. 6651(a)(1) Sec. 6654 Sec. 6662
1989 $45,048 $9,010 -- $11,143
1990 40,128 10,032 $2,642 --
1991 23,336 4,445 1,207 --
1992 35,613 8,361 1,448 --
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Petitioners, husband and wife, resided in Perrineville, New
Jersey, at the time their petition was filed. In 1985, Mr.
Provost and two other investors formed Sandew Homes, Inc.
(Sandew), an S corporation. Mr. Provost guaranteed several
mortgage loans relating to properties owned by Sandew. On their
1989 return, petitioners deducted a $159,565 ordinary loss, a
$58,863 net operating loss carryforward from 1988, and $29,086 of
mortgage interest payments, relating to Sandew. Petitioners
filed their 1989 return on April 7, 1994.
On July 12, 1993, petitioners filed a petition in the U.S.
Bankruptcy Court for the District of New Jersey under chapter 11
of the U.S. Bankruptcy Code. Petitioners' bankruptcy action was
converted from a chapter 11 to a chapter 7 case on July 11, 1994.
On April 14, 1997, petitioners were discharged from bankruptcy.
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