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Items Reallocated From Silver Glen to Marc by Journal Entry
As of December 31, 1997, Marc’s books and records showed
“Loans to stockholders” of $1,305,226. This amount included, in
addition to the $800,000 Bank loan proceeds that petitioner
transferred to Marc on December 29, 1997 (and certain nongermane
items), $213,571 that had been recorded by Silver Glen and that
was made up of $159,116 of legal fees and a $49,000 loan from
petitioner. By adjusting journal entry, these amounts had been
“reallocated” from Silver Glen to Marc as loans from petitioner.
Merger of Marc, Lakeview, and Pleasant Prairie
On or about December 15, 1998, pursuant to section
368(a)(1)(A), Marc, Lakeview, and Pleasant Prairie merged into
Marc Development Company, a C corporation wholly owned by
petitioner.
Petitioner’s 1997 Tax Return and NOL Carryback to 1994
On his 1997 Federal income tax return, petitioner reported
current-year ordinary income from Marc of $183,894, which he
offset against the $792,752 Marc loss that had been carried over
from 1996 pursuant to section 1366(d)(2). Consequently, for 1997
petitioner reported a net loss from Marc of $608,858.
On Schedule D, Capital Gains and Losses, of his 1997 income
tax return, petitioner reported a $49,000 long-term capital gain
from “Recapture of Loan Basis” with respect to the Silver Glen
loan that had been “reallocated” (as discussed above) by
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Last modified: May 25, 2011