- 3 - return, they reported an “other” loss on line 15 in the amount of $234,457. Petitioners attached to their 1992 return Form 4797, Sales of Business Property, which listed the $234,457 loss as a business bad debt. In notes attached to their 1992 return, petitioners stated, in relevant part: THE FOLLOWING BUSINESS BAD DEBT HAS BEEN WRITTEN OFF IN THE CURRENT YEAR: NOTE AMOUNT DUE NOTE PAYABLE TO JANE HESS FROM HESS & HESS CONSTRUCTION, INC. $234,457 ON DEMAND THE DEBTOR IS A CORPORATION WHOLLY-OWNED BY THE TAXPAYERS, WHICH IS NO LONGER SOLVENT. THE DEBT WAS DEEMED WORTHLESS WHEN THE CORPORATION NO LONGER COULD CONTINUE TO MEET ITS OBLIGATIONS AS THEY BECAME DUE. On or about April 15, 1996, petitioners jointly filed their 1995 Federal income tax return. On April 17, 1996, petitioners jointly filed their 1993 and 1994 Federal income tax returns. Petitioners claimed NOL carryover deductions in the amounts of $204,146, $167,526, and $127,943 in the taxable years 1993, 1994, and 1995, respectively. We must decide whether petitioners are entitled to deduct the NOL carryovers in the taxable years in issue. Resolution of this issue depends upon the validity of the bad debt deduction claimed by petitioners in 1992. See sec. 6214(b). Respondent argues that the money advanced by Mrs. Hess to Hess Inc. in 1992 was not a loan and that petitioners were not entitled to the NOL carryover deductions in the taxable years inPage: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011