Don E. Kramer - Page 8




                                        - 7 -                                         
          state.  On December 1, 1995, BERM was administratively dissolved,           
          by operation of law, for the failure to file the annual report              
          due July 1, 1995, and pay an annual franchise tax.  See 805 Ill.            
          Comp. Stat. 5/12.35 (West 1991); 805 Ill. Comp. Stat. 5/12.40               
          (West 1986).                                                                
               Petitioner reported the restaurant’s operating losses of               
          $54,819 on his individual Schedule C, Profit or Loss From                   
          Business, and abandonment losses4 of $44,184 on Form 4797, Sales            
          of Business Property, for taxable year 1995.                                
               In a notice of deficiency respondent determined that                   
          petitioner was not entitled to deduct the business operating and            
          abandonment losses, resulting in a tax liability of $17,223.                
          Respondent also determined a penalty of $3,445 pursuant to                  
          section 6662(a).  However, in the notice of deficiency respondent           
          determined petitioner incurred a capital loss of $141,358 from              
          his investment in BERM and allowed petitioner a deduction                   
          therefor of $3,000 pursuant to sections 165(g) and 1211(b).                 
          Discussion                                                                  
               The first issue for decision is whether petitioner operated            
          the restaurant business at the Holiday Inn as a sole                        
          proprietorship or a corporation during 1995.  Asked differently,            



               4    Petitioner’s reported abandonment losses are with                 
          respect to equipment and leasehold improvements that were                   
          abandoned when the restaurant ceased doing business in April                
          1995.                                                                       





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011