- 3 -
an S corporation, formed in 1977. Mr. and Mrs. Charlson each
owned 50 percent of each corporation. Great American operated
intercity buses that were purchased by, and leased from, C & C.
In 1985, C & C purchased, and placed in service, seven
intercity buses. C & C leased these buses to Great American from
January 1, 1986, through January 31, 1990, a term of 49 months.
At the conclusion of the first lease, C & C and Great American
entered into a second lease for an additional 19 months, from
February 1, 1990, through August 31, 1991. The leases were
negotiated separately and did not contain options to renew, and
the payment amounts and lease terms were different. C & C
purchased the buses for the sole purpose of leasing them to Great
American.
The buses were qualified investment property which qualified
for an ITC pursuant to section 38. The useful life of each of
the buses was 9 years.
The Charlsons’ subsequent tax returns claimed the ITC
carried over from 1985 and passed through C & C. In a prior
audit, respondent examined the Charlsons’, but not C & C’s, 1989
Federal income tax return, without challenging the ITC carryover.
OPINION
1. Eligibility for Investment Tax Credit
Section 38 allows an ITC, for qualified investments, the
amount of which is determined under section 46. Section
Page: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011