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Wedgewood’s Income Tax Returns
Wedgewood’s Federal income tax returns for 1987 through 1990
show the following balance sheet entries with respect to loans
from shareholders:
Year Beginning Balance Ending Balance
1987 $186,827 $1,773,887
1988 1,773,887 3,530,306
1989 3,530,306 4,380,992
1990 4,380,992 6,097,200
Wedgewood’s Federal income tax return for 1990 (the 1990
return) includes a Form 4797, Sale of Business Property, which
shows a disposition of furniture and fixtures acquired on
April 1, 1988, at a cost of $2,780,959, and disposed of on
September 1, 1990. There is no gross sales price shown, and a
loss is claimed in the amount of $2,506,244, which is the
acquisition price less depreciation (the difference being
Wedgewood’s adjusted basis in the property). Taking into account
certain other entries on the Form 4797, the net loss reported on
that form is $2,410,941 (the Form 4797 loss). A Schedule K-1,
Shareholder’s Share of Income, Credits, Deductions, Etc.,
accompanying the 1990 return, reports that petitioner’s share of
the Form 4797 loss is $1,759,987.
Culnen & Hamilton’s Income Tax Returns
Culnen & Hamilton’s Federal income tax returns for 1987 through
1989 show the following balance sheet entries with respect to
loans to stockholders:
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Last modified: May 25, 2011