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After concessions, the issues remaining for decision are
whether petitioners are: (1) Entitled to a deduction for accrued
interest; (2) entitled to a net operating loss carryover; (3)
entitled to deductions claimed by petitioner’s wholly owned S
corporation; and (4) liable for accuracy-related penalties.
FINDINGS OF FACT
When the petition was filed, petitioners resided in Salt
Lake City, Utah, where Mr. Gregersen has been engaged in the
newspaper publishing business for nearly 30 years. In 1983, Mr.
Gregersen began operating and managing his weekly business
publication, the Enterprise Business Newspaper (EBN), through the
Enterprise Newspaper Group (ENG), his sole proprietorship. On
July 10, 1987, Mr. Gregersen incorporated Enterprise Business
Newspaper, Inc. (EBNI), an S corporation, of which he was the
sole shareholder.
Neuman Petty was a longtime personal friend and financial
backer of Mr. Gregersen. They transacted business with each
other over numerous years through a variety of controlled
entities. Because of their close personal and business
relationship, Mr. Petty readily and frequently advanced money to
Mr. Gregersen. Mr. Petty and Mr. Gregersen generally did not
distinguish between themselves and their respective controlled
entities. In addition to funds lent for other purposes, Mr.
Petty lent approximately $900,000 to finance the expansion of Mr.
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