- 7 -
By December 31, 1989, Malibu Cedars had sold 96 of the 104
available condominiums. In terms of square footage sold, this
constituted 86,532 of the 92,621 square feet of available property
for sale (or 93.4 percent of the square feet of property for sale).
The Malibu Cedars project had gross sales in excess of $28 million.
By December 31, 1989, Malibu Cedars had paid $1,239,750 to HPD,
and $1,370,250 to Plaza in exchange for services rendered pursuant
to the Agreement. Moreover, as of December 31, 1989, the books of
Malibu Cedars reflected fees payable to HPD of $411,982 and fees
payable to Plaza of $455,349.
In calculating its costs of goods sold for tax year 1989,
Mailbu Cedars included $600,000 as construction costs, which was
based on an accounting entry (specifically, an adjusted journal
entry) that allocated construction costs on square footage sold
rather than on units sold. In a Notice of Final Partnership
Administrative Adjustment (FPAA), dated December 20, 1994, issued
to HPD-Latigo, as Malibu Cedars’ tax matters partner, respondent
disallowed for 1989: (1) The aforementioned $600,000, and (2)
$867,331 of claimed developers’ fees. (The issues raised in the
FPAA were not raised in the statutory notice of deficiency upon
which this case is based.) Respondent’s determinations in the FPAA
were contested in this Court, and subsequently conceded, by Malibu
Cedars. On May 20, 1997, a closing agreement was entered into
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011