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FYE May 31 Deficiency
1989 $66,096
1990 663,532
1991 1,014,268
1992 752,581
Flint Industries, Inc., and subsidiaries, hereinafter
collectively referred to as petitioner, filed a petition to
redetermine the deficiencies.1 Following concessions, the issue
presented for decision is whether the following worthless stock
and bad debt deductions claimed by petitioner on its consolidated
Federal income tax returns for fiscal years ending (FYE) May 31,
1992, 1993, and 1994, are allowable under sections 165 and 166:2
FYE May 31 Worthless stock Bad debt
1992 $7,374,438 $6,564,124
1993 2,435,876 815,105
1994 –- 6,085,248
Respondent contends that petitioner’s worthless stock and
bad debt deductions must be disallowed because (1) the amounts
claimed as bad debts were capital in nature, and (2) petitioner
has failed to prove that the alleged bad debts and worthless
1Petitioner reported net operating losses (NOLs) for fiscal
years ended 1992, 1993, and 1994 which it carried back to prior
years. Respondent’s adjustments reduced the NOLs available to be
carried back to prior years, resulting in the deficiencies
determined by respondent in the notice of deficiency.
2All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. Monetary amounts have
been rounded to the nearest dollar or deutsche mark as
appropriate.
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Last modified: May 25, 2011