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On behalf of V&M Management, the bankruptcy trustee prepared
and filed Forms 1120S, U.S. Income Tax Return for an S
Corporation, for tax years 1995 through 1999.4 The 1997 Schedule
K-1, Shareholder’s Share of Income, Credits, Deduction, etc.,
reported that petitioner realized a gain of $2,088,554 from the
sale of the Mandela Apartments’ property.5
Petitioner did not file individual income tax returns for
1996 and 1997. On August 13, 2001, respondent issued a notice of
deficiency for the 1997 tax year, which determined that
petitioner received income of $2,088,554. Respondent’s
determination was based on information reported on V&M
Management’s 1997 Schedule K-1. In determining the amount of
petitioner’s deficiency, respondent allowed deductions of
$1,402,543.6 Respondent determined that petitioner owed $189,745
in income taxes for 1997.
V&M Management has never claimed low-income housing credits
on any of its returns. V&M Management never applied for an
allocation of low-income housing credits and never received Form
8609, Low-Income Housing Credit Allocation Certification, from
4V&M Management’s 1997 return was signed by the bankruptcy
trustee on Sept. 1, 1998.
5The 1997 Schedule K-1 indicates that $1,794,602 was a net
sec. 1231 gain and $293,952 was a net long-term capital gain.
6Respondent carried forward an interest expense deduction of
$965,226 and a net operating loss of $433,167. Additionally,
respondent allowed $4,150 as a standard deduction.
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Last modified: May 25, 2011