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United States Individual Income Tax Return, for 1994. Because
each petitioner shareholder was unable to utilize fully his or
her pro rata share of Cox Tomato’s 1994 loss, each petitioner
shareholder filed a Form 1045, Application for Tentative Refund,
which reported a net operating loss (NOL) for 1994 and carried
that NOL back to prior taxable years. Christopher carried his
NOL back to 1991 and 1992, Gregory carried his NOL back to 1992
only, and Deborah carried her NOL back to 1991, 1992, and 1993.
In 1995, Cox Tomato had an operating loss of $193,825.
Deborah reported $12,000 of that loss on the Schedule E to her
1995 Form 1040.
II. Loans
A. Loan 91850 for $220,000
On April 7, 1989, Christopher and Brenda purchased improved
real estate located at 222 East Sheridan in Oklahoma City,
Oklahoma, and gave a mortgage on the property (first mortgage) to
the seller. Christopher subsequently leased the property to Cox
Tomato for use as a corporate office and warehouse (the
warehouse).
With respect to the warehouse, Christopher reported rents
received, mortgage and other interest paid, and expenses for
repairs paid, on his Schedules E to his 1991, 1992, and 1994
Forms 1040. Neither Gregory nor Deborah received any income or
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