John J. Reichel - Page 2

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               LARO, Judge:  This case was submitted to the Court without             
          trial pursuant to Rule 122(a).  John J. Reichel petitioned the              
          Court to redetermine a 1993 income tax deficiency of $32,887 and            
          a $6,577 accuracy-related penalty under section 6662(a).                    
          Respondent reflected this determination in a notice of deficiency           
          issued to petitioner on September 5, 1997.                                  
               Following concessions by the parties, we must decide whether           
          section 263A requires petitioner to capitalize real estate taxes            
          he paid in 1993 on land he purchased for development.  We hold it           
          does.  Unless otherwise indicated, section references are to the            
          Internal Revenue Code in effect for the year in issue, and Rule             
          references are to the Tax Court Rules of Practice and Procedure.            
          Dollar amounts are rounded to the nearest dollar.                           
               All facts have been stipulated and are so found.  The                  
          stipulation of facts and the exhibits submitted therewith are               
          incorporated herein by this reference.  Petitioner lived in                 
          Irvine, California, when he petitioned the Court.                           
               Petitioner has been a real estate developer since 1989.                
          In 1993, he operated his development business as a sole                     
          proprietorship under the name Sunwest Enterprises (Sunwest).  He            
          reported Sunwest's income and expenses on Schedule C, Profit or             
          Loss From Business (Sole Proprietorship).                                   

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