Irwin I. Skoller and Marsha Skoller - Page 4




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          drafting checks at Mr. Skoller’s direction.  In 1994, Ms. Skoller           
          left her employment at Mr. Skoller’s office and started a typing            
          business in her home.                                                       
               In 1985, Mr. Skoller and Samuel L. Sachs formed Princeton              
          Residential Associates Limited Partnership (PRA).  PRA was a real           
          estate venture in the business of purchasing residential real               
          estate in East Windsor and West Windsor, New Jersey, for rental             
          and resale.  Mr. Skoller solicited clients from his tax practice            
          to participate in the real estate venture.                                  
               In 1985 or early 1986, Mr. Skoller borrowed $60,000 to                 
          advance to PRA.  Over the course of PRA’s existence, the                    
          residential real estate market values in New Jersey declined.               
          The values of PRA’s homes fell below their purchase prices, and             
          PRA did not have equity in its assets.  As a result, no outside             
          lenders would provide loans to PRA.  In 1994, PRA sold its last             
          house and apparently ceased doing business.                                 
               Mr. Skoller prepared petitioners’ joint 1994 Federal income            
          tax return.  He reported the income and expenses from his tax               
          practice on Schedule C, Profit or Loss from Business.  On that              
          Schedule C, petitioners claimed a $96,211 business bad debt                 
          deduction for amounts allegedly lent to PRA.  The return also               
          reflected wage income earned by Ms. Skoller, capital gains, a               
          separate Schedule C from Ms. Skoller’s typing service, and a                
          Schedule E, Income or Loss From Partnerships & S Corporations,              






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