- 18 - While the gaps in the documentary record admittedly inhibit precise computation of all relevant figures, respondent’s stance would appear to be at odds with the stipulated evidence. Concerning Excellence, the parties do not dispute that Mr. Gleason made an initial contribution of $50,000 in 1992. Petitioners’ 1993 return reported no income or loss from Excellence, but their 1994 and 1995 returns reported ordinary income (business income and interest income) from Excellence of $317,959 and $826,737, respectively. We have also just sustained respondent’s position that an additional $264,371 should have been reported by petitioners in 1995. These income amounts would serve to increase basis. Hence, the record supports that sufficient basis was available to permit the $360,000 distributed during the entity’s FYE 1995 to qualify for tax-free treatment under section 1368(b)(1). Remaining basis would then be reduced by a corresponding amount under section 1367(a)(2)(A) and would result in a decreased carryover basis upon the subsequent exchange of Excellence shares for stock in Alofs and Target. As regards Alofs, again the parties do not dispute a $50,000 initial contribution, and petitioners reported ordinary income from Alofs of $401,192 on their 1994 return and, as we have held, are to include $470,814 for 1995. Again, these figures would seem to support tax-free return of basis treatment for the $237,000 distribution amount during the company’s FYE 1995.Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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