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Background
The parties submitted the instant case fully stipulated,
without trial, pursuant to Rule 122. The parties’ stipulations
of fact are incorporated herein by reference and are found as
facts in the instant case.
Petitioners Fleming G. Brooks and Sherry H. Brooks are
husband and wife. At the time of filing the petition, they
resided in Samson, Alabama. During the years in issue, Fleming
S. Brooks and Merle R. Brooks were husband and wife. Fleming S.
Brooks died on March 30, 2001. At the time of filing the
petition, Merle R. Brooks resided in Samson, Alabama. Fleming G.
Brooks and Fleming S. Brooks (Messrs. Brooks) and their
respective spouses were calendar year taxpayers.
At all relevant times, Fleming S. Brooks owned 51 percent of
the stock of Brooks AG Company, Inc., (the company), and Fleming
G. Brooks owned 49 percent. The company was an S corporation
with a calendar year tax year, and Messrs. Brooks each had a zero
basis in their stock in the company during all relevant times.
Before and during the years in issue, Messrs. Brooks
advanced money to the company on open account on three occasions.
The open account transactions and related computations of Messrs.
Brooks are described in detail in the Appendix to this opinion.
The first such advance occurred during 1997, when Messrs. Brooks
each advanced $500,000 to the company on open account (referred
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Last modified: May 25, 2011