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“disclaimer” opinions. FmHA raised concerns about BBJ’s failure
to maintain the reserve accounts required under the FmHA loan
agreement. FmHA refused to waive BBJ’s noncompliance under the
loan agreement. In 1989, FmHA began foreclosure proceedings
against BBJ for its failure to maintain adequate reserve
accounts.
In 1994, Yeo and Yeo, P.C., certified public accountants,
audited the North Scott Villa Apartments project for years 1992
and 1993. Yeo and Yeo provided a disclaimed opinion based on the
following:
As discussed in Note 6 to the financial statements,
North Scott Villa Apartments is in violation of certain
covenants of its loan agreements with the United States
Department of Agriculture Farmers Home Administration.
The lender has the option to demand immediate payment
of the mortgage note. On January 9, 1989, the owners
of North Scott Villa Apartments were notified by the
Untied [sic] States Department of Agriculture Farmers
Home Administration of the acceleration of the mortgage
note and immediate payment of the mortgage note. * * *
The financial statements do not include any adjustment
relating to the recoverability and classification of
recorded assets and liability amounts that might be
necessary should North Scott Villa Apartments be unable
to continue in existence.
Petitioner timely filed his 1994 Federal income tax return
wherein he reported $64,559 reflecting his pro rata share of
partnership loss attributable to a business bad debt. Petitioner
claims that the bad debt deduction is attributable to uncollected
accounts receivable due from the following entities:
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