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Tax Year Deficiency
1989 $94,685
1991 $23,230
1992 $70,009
1993 $38,083
1994 $23,718
1995 $6,039
After concessions, the issues for decision are:
1. Whether petitioners had sufficient basis under section
1366(d)(1)(B)1 with respect to certain indebtedness incurred to
fund the operations of Miller Medical Systems, Inc. (MMS), an S
corporation in which petitioner Timothy J. Miller was a
shareholder, to entitle them to deduct MMS’s losses of $750,000
in 1992, $431,691 in 1993, and $189,845 in 1994, which led to net
operating loss carryback deductions in 1989, 1990, and 1991, as
well as net operating loss carryover deductions of $238,293 for
1994 and $206,178 for 1995. We hold petitioners had sufficient
basis to deduct the aforementioned losses.
2. Whether petitioners were "at risk" within the meaning of
section 465 with respect to the aforementioned indebtedness at
1 All section references are to the Internal Revenue Code
of 1986, as in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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Last modified: May 25, 2011