- 8 -
income from CWS, $14,095 of wages, $178 of interest, and $929 of
capital gains. The distribution is not disclosed on their 1995
joint return.
CWS filed a timely Form 1120S, U.S. Income Tax Return for an
S Corporation, for 1994 and 1995. Each return was prepared by
Mr. Gaskins and signed by Ms. Gutierrez as CWS’s president. Some
of the expenditures made in connection with renovations made to
existing buildings on the Mystic Lake property were claimed as
business expense deductions on CWS’s returns for 1994 and 1995.
Some of the expenditures made in connection with the construction
of the castle residence were also claimed as business expense
deductions on CWS’s 1995 return. The income reported on CWS’s
1995 return did not include income attributable to the
distribution, nor was the distribution otherwise disclosed on
that return.
Respondent examined the 1994 and 1995 returns of CWS and, as
a result, disallowed various business expense deductions claimed
on each return. For 1995, respondent also determined that CWS
realized a capital gain of $102,939 from the distribution.7
7 Computed as follows in the notice of deficiency:
Fair market value of Mystic Lake property
as of Mar. 2, 1995: $168,489
Minus adjusted basis: (65,550)
Capital gain: 102,939
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011