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Year Original COGS Amended COGS
1990 $48,891 $102,000
1991 1,235,185 1,660,000
1992 35,000 45,000
This increase in its COGS caused the gallery to generate a larger
net loss for each of those years. Consequently, the trust’s net
operating loss for 1990 increased, the amount of the net
operating loss from 1990 that was applied against the trust’s
income earned in 1991 decreased, and the trust’s net operating
loss for 1992 increased.
The trust’s fiduciary income tax returns for 1993, 1994, and
1995 also reflected the gallery’s use of the collection’s
undiscounted value as the value for its inventory. On those
returns, the gallery reported the following amounts from its
operations:
Year COGS Net Loss
1993 $235,000 $727,416
1994 727,500 117,363
1/1/95-11/8/95 3,365,040 804,141
The trust’s fiduciary income tax return filed for 1995 reported
the trust’s operations for the period between January 1, 1995,
and November 8, 1995 (i.e., the day on which the trust was
terminated), and was the trust’s final return. The trust’s
fiduciary income tax return for 1995 reported that the value of
the gallery’s inventory was $31,518,850 as of November 8, 1995.
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