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entire $250,689 (rounded) which Farmers paid from the “contract
value” directly to Gloria Farnsworth during 1995 and 1996, and an
additional $122,871 in alleged basis, leaving a reported gross
profit of $388,180.
Petitioners reported on Form 6252 receiving $516,397 in
“contract value” payments in 1995, consisting of: (1) $323,560
of “contract value” received by Mr. Farnsworth; (2) $167,126 of
“contract value” received by Gloria Farnsworth; (3) the canceled
credit union loan of $20,514 (which was apparently repaid by
Farmers out of the contract value); and (4) the $5,197 Fred
Fourby loan guaranty (which was apparently also repaid or
withheld by Farmers).
Using Mr. Farnsworth’s and Gloria Farnsworth’s relative
shares of total contract receipts, petitioners reported a gross
profit percentage of 50.96 on Form 6252. For 1995, on the basis
of total payments reportedly received by Mr. Farnsworth and
Gloria Farnsworth of $516,397, petitioners reported taxable
installment sale income for the year of $263,156 (50.96 percent x
$516,397 = $263,156).
Respondent's notice of deficiency disallowed the reduction
from “contract value” for the payments made by Farmers directly
to Gloria Farnsworth, disallowed the reduction of Mr.
Farnsworth’s claimed recovery of basis in the DMAA, and
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Last modified: May 25, 2011