Michael H. Gulley and Paula M. Gulley - Page 11




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          $1,459,349 for that period and allocated $972,899 of that loss to              
          petitioner.                                                                    
               Petitioners contend that they may carry half of the 1991 NOL              
          forward to 1993 and 1994 under any of several theories:  (1) The               
          1991 NOL passed through GSD to its general partner (petitioner)                
          on July 11, 1991, when (according to petitioners) GSD terminated;              
          (2) GSD’s tax year closed as to petitioner under section                       
          706(c)(2) on July 11, 1991, causing the partnership’s tax items,               
          such as the accrued interest on the Sunbelt note, to pass through              
          to petitioner on that date; (3) GSD’s 1991 partnership loss for                
          the period January 1 to July 11, 1991, should be prorated to                   
          petitioner under section 706(d); and (4) petitioner’s interest in              
          GSD reverts to him because the bankruptcy trustee abandoned the                
          partnership interest under 11 U.S.C. section 554.  Petitioners                 
          also contend that petitioner’s share of the 1991 NOL was not                   
          extinguished by the amount of cancellation of indebtedness income              
          excluded from gross income under section 108.                                  
          A.   Whether the GSD Partnership Terminated on July 11, 1991                   
               1.    Whether GSD Terminated on July 11, 1991, Under Section              
                     708(b)(1)(A)                                                        
               Petitioners contend that GSD terminated on July 11, 1991,                 
          when petitioner filed his petition in bankruptcy.  Petitioners                 
          also argue that GSD terminated because it carried on no business               









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