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partnership. The capital contributions of the general partners
were $5,000 each, and petitioner’s capital contribution was
$490,000. Petitioner made her $490,000 capital contribution
after the Pierces had received substantial income tax refunds
based on the claimed losses.
On January 28, 1993, Seth Co., Inc. (Sethco), was
incorporated with Mr. Pierce as its president and petitioner’s
son, Derek Pierce, as its sole shareholder. Sethco’s place of
business was 5 Amanda Drive in Manchester, Connecticut. Both
petitioner’s son and Mr. Pierce received annual salaries from
Sethco. In exchange for assuming Derek Seth’s trade debt to
subcontractors, Sethco received Derek Seth’s heavy equipment,
some office equipment, and the use of Derek Seth’s business name.
On May 13, 1998, petitioner transferred her interest in
properties at 9 Deanne Lynn Circle and at 2643 Day Hill Road to
DDC. Petitioner received $1 in consideration for each transfer.
The Day Hill Road property was destroyed by fire on June 1, 1998.
The insurance proceeds were distributed as follows: (1) The
mortgage holder was paid the balance due on the mortgage, (2)
$77,710 was paid to DDC, and (3) $97,000 was paid to Sethco for
loss of contents.
On May 15, 2000, Sethco conveyed property at 5 Amanda Drive,
Manchester, Connecticut, to DDC in exchange for a $300,000
payment, which represented the property’s fair market value.
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