Thomas and Janice Gleason - Page 17

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          through 1995 does indeed reflect additional income from                     
          Excellence on Schedule E of $257,328 and additional interest                
          income of $7,043.  Given petitioners’ lack of specific dispute              
          regarding the proper year for inclusion, the Court will sustain             
          respondent on this issue.  We note, however, that neither party             
          has cited, nor has the Court’s research revealed, any legal                 
          authority that would definitively resolve the underlying                    
          substantive question of inclusion year in these circumstances.              
          We leave this question for another day and a more fully developed           
          record.                                                                     
               B.  Distributions From Schedules K-1                                   
               Mr. Gleason’s Schedules K-1 from Alofs and Excellence for              
          FYE 1995 reflect property distributions of $237,000 and $360,200,           
          respectively, that were not reported on petitioners’ 1995 return.           
          Likewise, the Schedule K-1 from Alofs for FYE 1996 shows a                  
          property distribution of $344,082 that was not reported by                  
          petitioners.  Respondent argues that these amounts are includable           
          as dividend income, principally on account of insufficient basis            
          to support tax-free treatment under section 1368(b)(1).  Although           
          petitioners’ contentions on this point are less than clear,                 
          statements made on reply brief suggest disagreement with the                
          premise that the distributions constitute a source of taxable               
          income.                                                                     







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