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Petitioners’ 1994 and 1995 Tax Returns
Petitioners reported the value-added payments on Schedules D
as proceeds from the sale of capital assets. Petitioners
subtracted from those proceeds the following amounts, which they
claimed represented their adjusted basis for purposes of
calculating their capital gain or loss:
Description 1994 1995
Option pool corn fees $18,070 $16,431
Payments to sons 50,000 70,000
Total basis claimed 68,070 86,431
Petitioners acknowledged during the trial, however, that they had
erroneously increased their basis by the payments made to the
sons, which had nothing to do with option pool corn purchased
from MCP but rather were to reimburse the sons, at least in part,
for petitioners’ share of farm-related expenses the sons had
paid.7
With the exception of some corn sale proceeds reported on
the Schedules D, petitioners reported their farm income and
expenses for 1994 and 1995 as farm rental income and expenses on
Forms 4835. On the Forms 4835, petitioners checked the box
acknowledging that they actively participated in the operation of
7Although petitioners conceded at trial that they
erroneously increased their basis in the option pool corn they
acquired to satisfy their MCP obligations by the amounts paid to
the sons for farm expenses, respondent did not move for an
increased deficiency in this case.
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Last modified: May 25, 2011