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The task of resolving the fact issue as to the fair market
value of petitioner’s separate health insurance group contracts
is complicated by petitioner’s pre-1987 history as a nontaxable
entity, during which years petitioner’s tax basis in and the fair
market value of petitioner’s health insurance group contracts
were not relevant and were not recorded on petitioner’s books and
records. This task is also complicated by the provisions of the
basis step-up provision of TRA 1986, under which it was
anticipated that taxpayers who thereby became taxable would go
through a process of identifying their assets, of making fair
market valuations of those assets as of January 1, 1987, and of
11(...continued)
$2,648,249 in loss deductions originally claimed on petitioner’s
1994 corporate Federal income tax return and the $4 million in
loss deductions raised by petitioner at trial relating to
petitioner’s 376 group contracts, petitioner agrees that the
burden of proof herein is on petitioner. Rule 142(a).
With regard, however, to the $2,648,249 in loss deductions
relating to the 376 group contracts that were claimed on
petitioner’s original 1994 corporate Federal income tax return,
petitioner asserts that respondent, in the notice of deficiency,
did not raise the factual valuation issue as a ground for the
disallowance of the claimed losses (i.e., whether petitioner, for
loss deduction purposes, adequately valued the 376 group
contracts). Petitioner therefore argues that respondent, rather
than petitioner, herein should have the burden of proof as to the
factual valuation issue to the extent of the $2,648,249 in loss
deductions claimed on petitioner’s original 1994 corporate
Federal income tax return. Rule 142(a)(1).
We disagree. In disallowing the total $2,648,249 in loss
deductions claimed on petitioner’s original 1994 corporate
Federal income tax return, respondent’s notice of deficiency,
among other things, used broad language relating to whether
petitioner sustained “any loss”, which language we believe in
this case includes the factual valuation issue.
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