David J. Lychuk and Mary K. Lychuk, et al. - Page 1

                                   116 T.C. No. 27                                    

                               UNITED STATES TAX COURT                                

             DAVID J. LYCHUK AND MARY K. LYCHUK, ET AL.,1 Petitioners v.              
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

          Docket Nos. 11794-99, 11855-99,          Filed May 31, 2001.                

                    A acquires and services multiyear installment                     
               contracts as its sole business operations.  A acquires                 
               each contract at 65 percent of its face value and is                   
               entitled to all principal and interest payments.  A’s                  
               employees perform various credit review services in                    
               order to decide whether to acquire each contract                       
               offered to A and, as to the contracts which A chooses                  
               to acquire, perform additional services in paying the                  
               sellers.  R determined that all of A’s salaries,                       
               benefits, and overhead (printing, telephone, computer,                 
               rent, and utilities) relating to its acquisition (and                  
               not to its service) operation were capital                             
               expenditures.  R also determined that A had to                         
               capitalize professional fees and commissions                           

               1 Cases of the following petitioners are consolidated                  
          herewith:  Edward C. and Virginia M. Blasius, docket No. 11855-             
          99; James E. and Mary Jo Blasius, docket No. 11863-99.                      

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