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Penalty
Year Deficiency Sec. 6662
1991 $125,883.04 $25,176.61
1992 142,707.58 28,541.52
1993 197,963.79 39,592.76
We consider the following issues: (1) Whether petitioner
has established a passthrough loss by showing his S corporation’s
entitlement: (a) to accrue and deduct a $1.5 million legal fee
for 1991; (b) to deduct $5,500 monthly payments made in
connection with a bingo business; and (c) to deduct claimed
supplies expenses for the 1991, 1992, and 1993 taxable years; (2)
if petitioner establishes a passthrough loss, whether petitioner
had basis in his wholly owned S corporation so as to allow
passthrough losses for his individual taxable years;2 and (3)
whether petitioner is liable for a negligence penalty under
section 6662(a) for 1991, 1992, and/or 1993.
FINDINGS OF FACT
At the time his petition was filed, petitioner resided in
Florida. Petitioner’s wholly owned corporation November, Inc.
(November), was incorporated in Virginia on December 19, 1988,
and for its 1989 through 1997 taxable years, reported, as an S
corporation, income and deductions under the accrual method of
accounting. In the late 1980’s petitioner became involved with
2 Respondent bears the burden of showing that petitioner did
not have basis because respondent raised the question of basis in
his trial memorandum and assumed the burden in accord with this
Court’s rules.
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Last modified: May 25, 2011