- 21 -
Does Petitioner Have Basis in His S Corporation so as To Be
Entitled To Deduct Any of the Passthrough Losses That May Be
Finally Redetermined for the Years Under Consideration?
We now turn to a critical9 question of whether petitioner
has sufficient basis in November so as to be able to deduct any
passthrough losses. In accord with the Form K-1 petitioner
received from November, he claimed a $753,728 passthrough loss.
Respondent determined that petitioner was not entitled to the
claimed loss on the grounds that petitioner had a passthrough
gain in each year due to the disallowance of various deductions
claimed by November. Some of the disallowed deductions are the
subject of this opinion, and our holding with respect to them may
result in a passthrough and/or carryover loss for the taxable
years under consideration. Respondent did not determine, in the
notice of deficiency, that petitioner lacked sufficient basis to
receive the “benefit” of any loss.
Respondent has shown that 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 of December 31,
1992, $578,231 as of December 31, 1993, and $768,223 as of
December 31, 1994. No loans from shareholders were reflected for
9 If petitioner is without basis in his S corporation, his
success with respect to November’s deduction items would, to the
extent that November’s expenses exceed its income, be a Pyrrhic
victory.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011