- 8 - $166,831 reported on the Form 1099 as income paid by CRC to Tony. Conley, McDonald & Sprague provided the agent with summary sheets (created by Conley, McDonald & Sprague from CRC’s records) describing the manner in which the income reported on the Form 1099 was calculated. On the basis of this investigation, respondent determined that, consistent with the information reported on the Form 1099, CRC had redeemed Tony’s shares for $166,831, representing a cash payment of $50,000 plus discharge of all Tony’s obligations to CRC, totaling $116,831. Moreover, respondent determined that petitioners had failed to substantiate any basis in the CRC stock. Consequently, in the notice of deficiency, respondent determined that petitioners must recognize $166,831 of capital gain from Tony’s disposition of his CRC shares and accordingly increased petitioners’ taxable income by $116,831 ($166,831 less the $50,000 capital gain that petitioners reported on their 1992 return). In addition, respondent determined that Tony did not engage in his stock car activity for profit. Respondent limited petitioners’ claimed deductions from this activity to $5,571, which was the gross income that petitioners reported therefrom. OPINION A. Capital Gain From Stock Redemption The parties disagree as to whether petitioners recognized $50,000 in capital gains from CRC’s redemption of Tony’s stock,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011