Jeffrey M. Guerrero and Genedine R. Guerrero - Page 3




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               On March 15, 1990, Messrs. Guerrero and Bone formed Olympic,           
          a subchapter S corporation.  Olympic was formed to handle a                 
          concrete project in Washington State.  Messrs. Bone and Guerrero            
          each contributed $500 in exchange for Olympic’s stock.                      
               A.J. Concrete Pumping, Inc. (A.J. Concrete), was a                     
          corporation in the business of pumping concrete.  Mr. Bone owned            
          51 percent of its stock, and Mr. Guerrero owned 49 percent of its           
          stock.  Messrs. Bone and Guerrero arranged for Olympic to lease             
          concrete and pumping trucks and to borrow capital from A.J.                 
          Concrete.  Olympic borrowed funds from A.J. Concrete during                 
          Olympic’s existence.  Olympic discontinued operations in 1992.              
               Olympic kept its books and records on an accrual basis and             
          converted to cash for tax purposes.  It reported, for Federal tax           
          purposes, on a calendar year basis.  Olympic reported a $64,491             
          loss in 1990, a $233,172 loss in 1991, and a $9,021 loss in 1992.           
          On Olympic’s Schedules L, Balance Sheet, attached to its 1990,              
          1991, and 1992 tax returns, Olympic did not list any loan                   
          obligations to its shareholders.                                            
               Mr. Bone claimed no loss from Olympic for 1990 because he              
          was not listed as a shareholder.  He claimed a $20,610 loss for             
          1991 and carried forward a $93,944 loss because of a basis                  
          limitation.  In 1992, Mr. Bone claimed his 1991 Olympic carryover           
          loss of $93,644 plus his 49-percent share of Olympic’s 1992 loss            
          for a total of $98,064.                                                     






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