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received from JCC into his personal bank account. JCC booked the
transferred amount as an amount payable from petitioner. At the
time petitioner received the transferred amount JCC was insolvent
and had not filed its U.S. Corporation Income Tax Returns for its
fiscal tax years ended June 30, 1986, 1987, and 1989,
respectively.
Although petitioner was aware that JCC was insolvent, he
believed that JCC’s net operating losses would result in no
Federal tax liability for JCC. It was usual for petitioner to
advance or loan funds to JCC and/or its subsidiaries. Prior to
receiving the $286,737.27 from JCC, there had been regular
advances and repayments of funds between JCC and petitioner.
Petitioner’s Income Tax Returns
On his 1991 Form 1040, U.S. Individual Income Tax Return,
petitioner reported interest income from the Johnson Corp., in
the amount of $25,924. That amount represented interest on
obligations owed to him by the Johnson Corp. On his 1992
individual Federal income tax return, petitioner also reported
wages from JCC’s subsidiaries (the Johnson Corp. and Heritage
Development Co.) in the amounts of $50,000 and $56,250,
respectively. Petitioner’s reported income of $304,637 did not
include the $286,737.27 received from JCC.
Tax Liability of JCC
JCC’s corporate income tax return, for its fiscal tax year
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Last modified: May 25, 2011