- 98 -
S corporations during 1994 and 1995. SLPC was wholly owned by
Rose during 1994 and 1995. Rose also held an ownership interest
in TPC during 1994 and 1995.
SLPC realized gross receipts or sales of zero in 1991, 1992,
and 1993 and had a combined total income of $21,720 for those
years. SLPC became insolvent during 1993. During 1994, SLPC
incurred large losses because its pipeline was shut down for
major repairs.
On December 31, 1994, Rose paid $350,000 of the amount that
SLPC owed to TPC by reducing the amount that TPC owed to him.
This transaction was recorded on TPC’s books by journal entries
that reduced the amount that it owed to Rose by $350,000 as well
as the amount that SLPC owed to it by $350,000. The transaction
was reflected on the books of SLPC by journal entries that
reflected a $350,000 reduction in the amount that it owed to TPC
and a $350,000 increase in the amount that it owed to Rose.
The Roses deducted losses from SLPC totaling $455,151 on
their joint income tax return for 1994.
Rose paid an additional $800,000 of SLPC’s debt to TPC
during 1995 by reducing the amount that TPC owed to him. This
transaction was recorded on TPC’s books by journal entries that
reduced the amount that it owed to Rose by $800,000 as well as
the amount that SLPC owed to it by $800,000. The transaction was
reflected on the books of SLPC by journal entries that reflected
Page: Previous 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 NextLast modified: May 25, 2011