Wayne A. McFadden - Page 2




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                                               Accuracy-Related                       
                                               Penalty                                
                Year            Deficiency     Sec. 6662(a)                           
                1995         $39,052           $7,810.40                              
                1996         24,428            4,759.00                               
               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the years at issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.                                                                  
               After concessions, the issues for decision are whether                 
          petitioner:  (1) Correctly computed his basis in a parcel of real           
          property he acquired and sold at a loss in 1995, or (2) in the              
          alternative, is entitled to a nonbusiness bad debt deduction in             
          1995 for a loan to petitioner’s daughter and her former                     
          boyfriend.                                                                  
               We hold: (1) Petitioner overstated his basis and the                   
          resulting loss on the sale of the property that he computed on              
          his return, and (2) is entitled to a nonbusiness bad debt                   
          deduction.                                                                  
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and attached exhibits are incorporated             
          by this reference.                                                          
               Petitioner resided in Foster City, California, when he filed           
          the petition in this case.                                                  






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