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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.
After concessions by the parties, the remaining issue for
decision is whether, for 1993 and 1994, petitioner may reduce its
gross income by expenses paid to construct two houses.
FINDINGS OF FACT
Petitioner is a Florida corporation whose principal place of
business was in Lake Placid, Florida, at the time the petition
was filed. Petitioner does land clearing and demolition work in
Dade County, Florida. During the years in issue, Allen Wood was
petitioner's president and sole shareholder.
Allen Wood owned two unimproved lots in Highlands County,
Florida. In 1993 and 1994, petitioner expended $128,025 and
$35,194, respectively, to construct two single-family houses on
Allen Wood's lots. In calculating its 1993 and 1994 gross
income, petitioner subtracted these expenditures as cost of goods
sold.
On February 1, 1994, Allen Wood formed Wood Developers, Inc.
(Wood Developers). He was president and a 50-percent shareholder
of the corporation. In March 1994, Allen Wood transferred to
Wood Developers his interest in the improved lots and Wood
Developers sold both properties. On its 1994 Federal tax return,
Wood Developers reported the income from the sale of the
properties.
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Last modified: May 25, 2011