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sums they transferred to Border. Interest was not charged or
paid on the amounts petitioner claims are loans to Border.
Mr. Tedford suffered a heart attack and died on October 6,
1995. Pursuant to the terms of Mr. Tedford’s will, petitioner
was the sole beneficiary and was appointed the Independent
Executrix of Mr. Tedford’s estate.
On November 29, 1995, all of the death benefits of Mr.
Tedford’s personal life insurance policies were paid to SunWest
Bank in the sum of $98,290, as SunWest had required the life
insurance as additional collateral on the working capital loan
that it had made Border.
Border ceased operation after Mr. Tedford passed away.
Border sold its assets at an auction on June 20, 1996, to pay
company debts, but continued its efforts to collect its accounts
receivable. The gross total for the items sold at auction was
$311,690.
On its 1996 Form 1120 Border reported $218,489, as income
from forgiveness of indebtedness.
Petitioner filed her 1997 Form 1040, U.S. Individual Income
Tax Return, on May 25, 1998. Petitioner did not claim any
business bad debt loss related to Border on her 1997 Form 1040.
In October 1999, petitioner filed a Form 1040X, Amended U.S.
Individual Income Tax Return for 1997. On that return petitioner
reported, in part, (1) a business bad debt loss of $218,489 from
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