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1. Disallowance of Long-Term Capital Loss Carryover
The long-term capital loss carryover of $42,000 that was
reported on the Gownis’ 1999 return was disallowed because it
resulted from their reporting a capital loss rather than a
capital gain from the transaction between Tomson and Sembler on
their 1998 return. The IRS adjusted the Gownis’ income to
account for this disallowance.
2. Corporate Distributions
The Gownis received and deposited into their personal bank
accounts checks from Tomson, net of repayments, totaling $50,610.
The IRS determined that Tomson was an S corporation during 1999
and that these distributions were made from sources other than
the proceeds of the transaction between Tomson and Sembler.
Therefore, the IRS determined that the Gownis should have
included this amount in income.
The Gownis received and deposited into their personal bank
accounts checks from Mina of Forest City, net of repayments,
totaling $63,277. The IRS determined that Mina of Forest City
was an S corporation during 1999. Accordingly, the IRS
determined the net taxable distribution that the Gownis received
from Mina of Forest City by reducing this $63,277 amount by
one-half of the ending balance of the accumulated adjustments
account reported on Mina of Forest City’s Form 1120S filed for
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