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During 1982, petitioners formed a second S corporation named
Gilliflower’s Shoppe Steinway Street, Ltd. (GF II). In October
1982, GF II opened a 3,500-square-foot retail store in Astoria,
New York. This store operated at a loss in 1982 and closed in
July 1984. GF II later opened two other stores. The record does
not establish the income or loss of GF II for any of its taxable
years. Nor does the record establish the amount of the income or
loss of GF II that passed through to petitioners.
On June 23, 1983, petitioners filed a chapter 11 petition in
the name of GF II in the United States Bankruptcy Court for the
Eastern District of New York.1 On the same date, they filed in
the same court a chapter 11 petition in their own names. On
April 5, 1984, they filed in that court a chapter 11 petition in
the name of GF I.2 All three proceedings were converted to
chapter 7 proceedings on November 16, 1984, and each of these
proceedings was closed in or about 1987.
Petitioners reported on their 1988 through 1997 Federal
income tax returns the following negative amounts of adjusted
gross income:
1 At the time of this filing, petitioners each owned 50
percent of the stock of GF II. Also at that time, GF II reported
in its filings that its assets and liabilities on June 20, 1983,
totaled $722,850 and $448,640, respectively.
2 At the time of this filing, petitioners were the sole
shareholders of GF I.
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