Teruya Brothers, Ltd. & Subsidiaries - Page 8

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          $8.9 million and $3.73 million, respectively.4  At the time of              
          the sales, Times had a $15,602,152 adjusted basis in Kupuohi I              
          and a $1,502,960 adjusted basis in Kaahumanu.  Times realized a             
          $6,453,372 capital loss on the sale of Kupuohi I but did not                
          recognize this loss on its tax return because of the restriction            
          on transactions between related taxpayers under section 267.5               
          Times realized and recognized a $2,227,040 gain on the sale of              
               At some point, TGE transferred Kupuohi I and Kaahumanu to              
          Teruya.  As of the date the petition was filed, Teruya still                
          owned these properties.                                                     
          II. Federal Income Tax Return                                               
               Petitioner filed Form 1120, U.S. Corporation Income Tax                
          Return, for its taxable year beginning April 1, 1995, and ending            
          March 31, 1996.  Under section 1031(a)(1), petitioner deferred              
          $1,345,169 in realized gain from the Ocean Vista transaction                
          (after deducting claimed selling expenses of $30,061) and                   

               4 The proceeds from the sale of Royal Towers ($11,932,000)             
          and the additional funds from Teruya ($724,554) total                       
          $12,656,554.  The agreed sale price for Kupuohi I ($8.9 million)            
          and Kaahumanu ($3.73 million), however, totaled $12,630,000.  The           
          parties do not explain this seeming discrepancy.                            
               5 The parties stipulated the $6,453,372 realized capital               
          loss on the sale of Kupuohi I; however, on the basis of the $8.9            
          million sale price and the $15,602,152 adjusted basis that the              
          parties stipulated, it appears that the loss realized was                   
          actually $6,702,152.  The parties do not address this seeming               

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