- 63 -
On its 1997 tax return, petitioner reported that CMACM had a
$1,179,013 cost basis for the remaining portion of the $4,056,220
Jenrich note that CMACM transferred to Lexington for Lexington’s
$1,000 unsecured promissory note. On the basis of that,
petitioner claimed a $1,178,013 loss on the partial disposition
of the Jenrich note to Lexington. Petitioner also claimed
$237,853 of rental expenses on its 1997 tax return attributable
to CMACM’s purported over lease rental payments during 1997. The
rental expenses claimed by CMACM equaled, and were completely
offset by, the amounts due to CMACM under Jenrich’s equipment
purchase installment note.
Finally, on its 1998 tax return, petitioner claimed
deductions for the worthlessness of Lexington’s $10,000 and
$1,000 unsecured promissory notes.
In sum, on the basis of its $10 investment in stock and
assumption of a purported $215,000 obligation owed by CAP to EQ,
petitioner claimed over $4.2 million in deductions from the
second lease strip deal transactions. ($1,982,825 + $459,221 +
$414,041 + $1,178,013 + $237,853 + $10,000 + $1,000 =
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