Stephen T. Fan and Landa C. Fan - Page 6

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          return, they reported a $4,879 current year disabled access                 
          credit attributable to the purchase of the system.  After taking            
          into account applicable limitations, the current year disabled              
          access credit resulted in a claimed general business credit of              
          $2,969.  See sec. 38.  The balance of the 1995 credit ($1,910)              
          was treated as a carryforward general business credit on a Form             
          3800, General Business Credit, included with petitioners’ 1996              
          Federal income tax return.  Taking into account applicable                  
          limitations, they claimed a general business credit of $1,114 for           
          that year, all of which is attributable to the purchase of the              
          system in 1995.                                                             
               In the notice of deficiency, respondent disallowed the                 
          disabled access credit for 1995 and the associated carryforward             
          to 1996; instead respondent treated the entire cost of the                  
          intraoral camera system as a deductible business expense under              
          section 179.  According to the explanation contained in the                 
          notice of deficiency, the disabled access credits attributable to           
          the system were disallowed because the system “does not permit              
          patients to be treated who were excluded from services before the           
          purchase of the camera.”                                                    
               Subject to various limitations, an eligible small business             
          is entitled to a disabled access credit for eligible access                 
          expenditures for the taxable year.  Sec. 44.  The parties agree             

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