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Petitioner recorded the $175,000 Amoco advance on its books
as “Amoco/Deferred Income”. Each month, petitioner reduced the
“Amoco/Deferred Income” account balance by $1,458.33. This
amount was determined by dividing $175,000 by 120 months.
Petitioner did not record on its books any amount for interest
accruing on the Amoco advance.
Petitioner timely filed its Forms 1120, U.S. Corporation
Income Tax Return, for the taxable years 1996 and 1997. On
Schedule L, Balance Sheets per Books, attached to petitioner’s
1996 Form 1120, petitioner reported $164,792 of the Amoco advance
as a liability representing deferred income. On the 1996 Form
1120, petitioner reported the credited $10,208 payment in
connection with the Amoco advance as other income. On the 1996
return, petitioner reported a 1996 net operating loss of $91,654
and a net operating loss carryover from 1995 of $38,317,
resulting in a $129,971 net operating loss carryover to 1997.
On Schedule L, Balance Sheets per Books, attached to
petitioner’s 1997 Form 1120, petitioner reported $147,292 of the
Amoco advance as a liability representing deferred income. On
the 1997 Form 1120, petitioner reported the $17,500 credited
payment as other income and described the payment as
miscellaneous income from the store. On the 1997 return,
petitioner reported taxable income of $28,963 before net
operating loss deduction and a net operating loss carryover
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Last modified: May 25, 2011