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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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Last modified: May 25, 2011