- 8 -
calculated as the difference between the sales price and GIA’s
basis, was $58,373, $62,517, and $11,500 for agreements executed
in 1993, 1994, and 1995, respectively.
GIA’s Accounting and Reporting
With their 1993, 1994, and 1995 Federal income tax returns,
petitioners included Schedules C, Profit or Loss From Business,
with respect to GIA. On each such Schedule C, petitioners
indicated GIA’s accounting method by checking the box labeled
“Accrual”. A like designation was made on Schedules C filed with
returns for the preceding years 1984 through 1992.
As regards accounting for the above-described real estate
transactions in particular, the methodology generally utilized by
petitioners has been stipulated by the parties. During the term
of a contract for deed, petitioners would report as income the
interest received on the promissory note entered into in
conjunction with the contract. The portion of any payment
allocable to principal would be treated as a deposit on the
purchase and would be recorded as a liability on the books of the
company. If a property were repossessed prior to completion of
the contract, this deposit would be applied first to repairs and
maintenance, and any remaining amount would be reported as
miscellaneous income. The properties would also be depreciated
by GIA during the payment period.
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