George Maciel - Page 4

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               In addition to Alviso and GMT, petitioner engaged in the               
          following noncorporate business activities.                                 
          B.   The BAMA Partnership                                                   
               In 1989, petitioner entered into a partnership with Michael            
          D. Mitchem named BAMA Equipment (BAMA).   BAMA was engaged in the           
          business of selling new and used trucks.  Petitioner owned a 50-            
          percent interest in BAMA.                                                   
               During the years in issue, BAMA wrote numerous checks to               
          petitioner and/or his related corporation(s), which he deposited            
          into noncorporate bank accounts over which he had signatory                 
          authority.  BAMA paid petitioner rent for the use of one of his             
          real properties, which he deposited into the aforesaid bank                 
          accounts.  BAMA was also a sponsor of petitioner’s racing                   
          business.3                                                                  
               On his 1991 and 1992 returns, petitioner claimed deductions            
          for passthrough losses from BAMA of $56,786 and $8,777,                     
          respectively.  For those years, petitioner’s capital accounts in            
          BAMA were negative $26,046 and $34,823, respectively.  As                   
          previously stated, respondent concedes loss deductionss for 1991            
          and 1992 of $26,046 and $8,777, respectively.  Additionally,                
          respondent concedes petitioner’s capital loss deduction of $3,000           
          for 1992.                                                                   
               BAMA dissolved in 1992.                                                

               3Petitioner’s racing business is discussed in detail below.            





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