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constructing Orange Tree Plaza. The note was secured by the
Orange Tree Plaza property and personally guaranteed by
petitioner.
On or about November 19, 1993, Texas Jacks borrowed
$1,427,000 from First Northern Bank of Dixon (the Texas Jacks
loan). The note was secured by the Texas Jacks dance hall and
personally guaranteed by petitioner.
Sometime before 1995, the City of Vacaville, California,
sued Orange Tree and other defendants, not including petitioners,
to foreclose liens due to Orange Tree’s failure to pay
assessments against the Orange Tree Plaza.
During 1995 and 1996, petitioner personally paid delinquent
real property taxes that had accrued with respect to the
partnerships’ Vacaville properties. These payments (the tax
payments) totaled $426,566 in 1995 and $501,742 in 1996. On the
Schedules E, Supplemental Income and Loss (Schedules E), attached
to their 1995 and 1996 joint Federal income tax returns,
petitioners claimed the tax payments as deductible expenses.1
1 On the Schedules E, Supplemental Income and Loss
(Schedules E), attached to petitioners’ 1995 and 1996 joint
Federal income tax returns, the taxes paid with respect to the
Vacaville properties were included in amounts claimed as paid
with respect to rental property located in Fairfield, Cal.
Petitioners have stipulated that the taxes were not in fact paid
with respect to the Fairfield, Cal., property or any other
property listed on the Schedules E for 1995 and 1996.
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Last modified: May 25, 2011