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Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
Dollar amounts are rounded to the nearest dollar.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. The
stipulation of facts and exhibits submitted therewith are
incorporated herein by this reference.
Petitioner is an attorney who practiced law through his
wholly owned corporation, Patrick E. Catalano Professional Corp.
(petitioner’s law firm), during all relevant times. The law firm
had offices in San Francisco and San Diego, California. When
petitioner filed his petition in this case, he resided in San
Francisco, California.
a. Foreclosure of Petitioner’s Residence
In 1988, petitioner purchased a residential condominium in
San Francisco, California (petitioner’s residence), for
$1,800,000. Wells Fargo Bank (Wells Fargo) financed $1,400,000
of the purchase price, secured by a lien on petitioner’s
residence. Petitioner ceased making payments of either interest
or principal on the Wells Fargo note as of June 1, 1994.
In July 1994, petitioner and his law firm each filed a
voluntary petition for bankruptcy under chapter 11 in the U.S.
Bankruptcy Court for the Northern District of California
(bankruptcy court). At the time petitioner filed his bankruptcy
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Last modified: May 25, 2011