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We find the stipulated facts accordingly. Petitioner is a C
corporation with a fiscal year ending on May 31. It specializes
in the repair and painting of buildings in the State of
Tennessee. Its mailing address was in Brighton, Tennessee, when
its petition was filed.
In 1992, petitioner was awarded a contract (contract) to
repair and paint 1,500 service stations in California, Arizona,
Nevada, Oregon, Washington, and Alaska. Petitioner began working
on the contract in 1992 and purchased in and around California
most of the trucks, automobiles, and other equipment
(collectively, equipment) necessary to complete its work under
the contract. The equipment was generally used property
purchased at auction.
In 1994, petitioner began storing on a lot (lot) in
California some of the equipment that had become inoperable. The
record does not indicate that petitioner documented the assets
which it placed on the lot. On May 31, 1995, petitioner sold
some of the equipment located on the lot for $30,000. Petitioner
reported on its Federal income tax return for its 1995 taxable
year that it had paid $360,728 for the equipment sold in that
transaction, and it claimed a $199,408 loss with respect to the
sale. Petitioner reported on the return that the assets sold in
the transaction were “VARIOUS ASSETS–-CA” and did not otherwise
identify those assets.
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