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The deficiencies stem from respondent's recharacterizing the
income Chester F. Sidell (Mr. Sidell) received from the rental of
properties to his wholly owned C corporation from passive to
nonpassive. Respondent now concedes the accuracy-related penalty
under section 6662(a) for 1994.
The issues for decision are: (1) Whether respondent's
recharacterization of the rental income Mr. Sidell received from
his wholly owned C corporation was proper; and if so, (2) whether
respondent properly disallowed the rehabilitation credits
petitioners claimed for those years.
All section references are to the Internal Revenue Code as in
effect for the years in issue.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the exhibits submitted therewith are
incorporated herein by this reference.
Petitioners, husband and wife, resided in Framingham,
Massachusetts, at the time they filed their petition contesting
respondent's determinations. For both years in issue, petitioners
filed joint Federal income tax returns.
Acquisition of Rental Properties
Mr. Sidell was the sole beneficiary of five trusts: The
Manche Realty Trust, CFS Realty Trust, FLS Realty Trust, GES Realty
Trust, and RMS Realty Trust. All five trusts are nominee trusts
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