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of the capitalized installment contracts expenditures relating to
installment contracts which it never acquired. We hold it may
deduct that portion under section 165(a).3 We must also decide
whether ACC may deduct the portion of the PPM expenditures
relating to the abandoned offering. We hold it may deduct that
portion for 1994 under section 165(a).
FINDINGS OF FACT
The parties have stipulated many of the facts. We
incorporate herein the parties’ stipulation of facts and the
exhibits submitted therewith. We find the stipulated facts
accordingly. Each petitioning couple is a husband and wife who
resided in Michigan when their petition was filed. Each
petitioning couple filed a joint Federal income tax return for
the relevant years.
ACC is a cash method taxpayer that was incorporated in 1992
and elected shortly thereafter to be taxed as an S corporation
for Federal income tax purposes. It was formed to provide
alternate financing for purchasers of used automobiles or light
trucks (collectively, automobiles) who have marginal credit. Its
sole business operation is (1) the acquisition of installment
contracts from automobile dealers (dealers) who have sold
automobiles to high credit risk individuals and (2) the servicing
3 Unless otherwise indicated, section references are to the
Internal Revenue Code applicable to the relevant years. Rule
references are to the Tax Court Rules of Practice and Procedure.
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