S.W. DePasture - Page 8





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          a substantial sum5 had been expended in connection with these               
          renovations.                                                                
               On March 2, 1995, CWS distributed the Mystic Lake property             
          to the petitioner and Ms. Gutierrez (the distribution).  Soon               
          thereafter, petitioner and Ms. Gutierrez obtained a $300,000                
          construction loan from Barnett Bank to fund the construction of             
          the castle residence that they intended to build on the property.           
          As of the close of 1995, the castle residence was substantially             
          completed.                                                                  
               Petitioner and Ms. Gutierrez filed a timely joint Federal              
          income tax return for each year in issue.  Each return was                  
          prepared by John D. Gaskins,6 a certified public accountant whose           
          license was later revoked because he was convicted of Federal               
          income tax evasion.  Income of $64,400 is reported on                       
          petitioner’s 1994 return, which income consists of $34,635 of               
          shareholder pro rata income from CWS, $29,546 of wages; and $219            
          of interest.  Income of $33,461 is reported on petitioner’s 1995            
          return, which income consists of $18,259 of shareholder pro rata            


               5 The parties stipulated that the basis of the Mystic Lake             
          property had increased by $63,949 as of March 1995.  As best as             
          can be determined from the record, the addition to the property’s           
          basis is attributable to the improvements made to the four                  
          existing structures.  Some of the expenditures now included in              
          the property’s basis apparently gave rise to deductions claimed             
          by CWS and disallowed by respondent.                                        
               6 Mr. Gaskins was also involved as a principal with                    
          petitioner in various welding businesses.                                   





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