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The corporation has not defaulted on the loans.
The Guarantors
Petitioner’s father testified that he agreed to act as
guarantor: “To expedite the loan and, hopefully, get a little
lower interest rate.” Petitioner’s father was not a shareholder,
officer, or employee of the corporation.
Petitioners’ Returns
On petitioners’ Federal income tax returns for 1994 through
1996, petitioners claimed losses from the corporation of
$39,621.25, $44,390.02, and $53,188.25, respectively. For 1994,
petitioners claimed a net operating loss carryforward of $743.62
(the carryforward), which resulted from losses of the corporation
for 1993 and prior years (both such carryforward and the losses
from the corporation for 1994 through 1996 being referred to as
“the losses”).
The Notice
The adjustments giving rise to the deficiencies in tax here
in question are respondent’s disallowance of any deductions for
the losses.1 Respondent’s grounds for such adjustments are that,
1 Inexplicably, respondent’s disallowance for 1995 is in
the amount of $42,564, which is $1,825.02 less than the loss
claimed by petitioners ($44,390.02). We shall sustain
respondent’s determination of a deficiency with respect to 1995
only to the extent attributable to respondent’s disallowance, in
the amount of $42,564.
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