- 21 -
disclosure statement that stated petitioner was engaged in a
trade or business which consisted of: (1) The extension of loan
guaranties in exchange for fees; and (2) making loans in
anticipation of a high rate of return in the form of interest
income in respect of those loans.
On the returns for 1990-93, petitioner claimed the following
bad debt deductions, relating to his loans to WMG, on his
Schedules C for those respective tax years:
Tax Year WMG
1990 $2,741,053
1991 437,614
1992 887,610
1993 9,112
In the notices of deficiency issued to petitioner(s), respondent
determined that petitioner’s lending and financing activities for
1990-95 did not constitute a trade or business. Respondent
determined that the bad debt amounts should have been reported as
nonbusiness bad debts on Schedule D, Capital Gains and Losses, of
petitioner’s returns for those years.17
17Petitioner filed Forms 1045, Application for Tentative
Refund, in which he sought to carry back net operating losses
from 1990, 1991, and 1992, to 1989. Each of those claimed
carrybacks was disallowed by respondent in the notice of
deficiency for 1989. Petitioners filed a Form 1040X, Amended
U.S. Individual Income Tax Return, for 1992 in which they claimed
an additional net operating loss, and petitioner filed a Form
1040X for 1989 in which he claimed a net operating loss carryback
from 1992. Respondent did not allow those claims, and he did not
include them in the notices of deficiency for 1989 and 1992.
Petitioner also claims that he incurred a net Schedule C loss of
$260,388 for 1993 attributable to a lending/financing business
(continued...)
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011