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1992, and 1993, respectively. Respondent also disallowed about
$5,500 of the $12,293 monthly payments that November had claimed
as rent on the basis that those amounts were capital payments
that were being paid to acquire the bingo business.
Petitioner, on his 1991 income tax return, claimed a
$753,728 flowthrough loss from November, his S corporation.
Respondent, due to his determination denying certain of
November’s claimed deductions, in turn, disallowed petitioner’s
claimed loss. Petitioner claimed a carryover of the 1991 loss to
his 1992 and 1993 income tax returns. Respondent did not make
the determination, in the deficiency notice, that petitioner had
insufficient basis in his S corporation (November) to claim the
loss.
November’s capital stock was issued for $1,000 and did not
increase. Loans from shareholders, at one time, approached
$4,500 but decreased to zero by the time of the years under
consideration. Petitioner recognized $79,768 and $20,099 of
passthrough income from November, as reflected on Forms 1120S,
Schedules K, Shareholders’ Shares of Income, Credits, Deductions,
Etc. (Form 1120S) for the 1989 and 1990 tax years. November’s
balance sheets reflect $1,000 in equity, and the loans to
shareholders on November’s balance sheets reflected $96,007 as of
December 31, 1990, $143,548 as of December 31, 1991, $332,029 as
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