Flint Industries, Inc. and Subsidiaries - Page 2




                                        - 2 -                                         
                  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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