Madeline Cook - Page 8

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               Petitioner proffers an alternative argument.  Cold Springs             
          failed to file corporate tax returns after the taxable year ended           
          December 31, 1993.  Because no corporate returns were filed and             
          no Schedules K-1 were prepared, there is no information available           
          upon which to make an allocation of the distributions to her from           
          Cold Springs with respect to ordinary income and capital gain.              
          Petitioner argues, therefore, that we should make such an                   
          allocation on the basis of extrapolations from Cold Springs' 1992           
          and 1993 tax returns.                                                       
               Petitioner asks the Court to recharacterize ordinary income,           
          as she reported it on her individual income tax returns, as long-           
          term capital gain, on the basis of her contention that "it is               
          very likely, if not certain, that a substantial portion of the              
          income would have been [so] characterized" if Cold Springs had              
          filed returns in 1994 and 1995.  Petitioner contends that                   
          approximately 67 percent of the income that she received from               
          Cold Springs during 1994 and 1995 should be recharacterized as              
          long-term capital gain pursuant to section 1231.  Petitioner’s              
          contention is rooted in the treatment of the distributions from             
          Cold Springs' 1992 and 1993 income tax returns where 64 percent             
          and 70 percent, respectively, of the funds distributed were                 
          characterized as section 1231 gains.                                        

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