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Level Propane generated substantial losses3 during the years
at issue. Petitioner increased his basis in the stock of Level
Propane by the amount of the $4 million loan to claim as
passthrough deductions the net operating losses of Level Propane.
Respondent determined that petitioner’s basis in the stock of
Level Propane did not increase by the amount of the $4 million
loan to Level Propane because petitioner had never paid nor had
he ever been called upon to pay any amount under the $4 million
loan. Respondent consequently found that petitioner had
insufficient basis against which to deduct any losses.
Respondent mailed to petitioner notices of deficiency on June 28,
2002, and July 16, 2003, determining the following deficiencies:
Year Deficiency
1990 1$169,270
1991 77,709
1992 47,733
1993 351,162
1995 305,162
1996 1,939,205
1998 31,397
1999 50,870
2000 197,365
1All dollar amounts are rounded to the nearest dollar.
Petitioner timely filed a petition contesting respondent’s
determination, arguing that his basis was increased by the amount
3Level Propane and Neptune Propane reported losses of
$2,341,173 in 1993. Most of petitioner’s increased basis,
consequently, would have been depleted in 1993. The deficiencies
respondent determined for 1995, 1996, 1998, 1999, and 2000,
therefore, would be sustained even if petitioner was allowed the
$4 million basis increase.
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