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For all relevant periods, Cox Tomato was an S corporation
that bought and sold fresh produce primarily from California and
Florida. In 1987, petitioner shareholders inherited their shares
of stock in Cox Tomato from their father. For all relevant
periods, petitioner shareholders were the sole shareholders of
Cox Tomato and used the cash method of accounting and the
calendar year for tax reporting.
During the years at issue, Christopher and Gregory each
owned 34.32 percent and Deborah owned 31.36 percent of Cox
Tomato’s stock. Without regard to any of the disputed
transactions discussed infra, their bases in their shares of Cox
Tomato stock were:
Christopher Gregory Deborah
12/31/87 $33,250 1$33,250 $28,500
12/31/88 7,534 7,534 6,460
12/31/89 34,664 34,664 31,889
12/31/90 15,465 15,465 15,210
12/31/91 (26,575) (26,575) (21,788)
12/31/92 9,045 9,045 11,890
12/31/93 (911) (911) 2,791
1The parties stipulated each petitioner shareholder’s basis.
The stipulation with respect to Gregory’s basis, however, appears
to contain a typographical error. The corrected calculation
indicates that Gregory actually had a basis on
Dec. 31, 1987, of $33,250 instead of $32,250, the stipulated
number.
In 1994, Cox Tomato had an operating loss of $375,896.
Petitioner shareholders reported their pro rata shares of Cox
Tomato’s 1994 operating loss on their respective Schedules E,
Supplemental Income and Loss, to their respective Forms 1040,
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Last modified: May 25, 2011