T.C. Memo. 2006-78
UNITED STATES TAX COURT
SID PAUL RUCKRIEGEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
AL A. RUCKRIEGEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 21675-03, 21676-03. Filed April 18, 2006.
Ps were each 50-percent shareholders in an S
corporation that incurred ordinary losses before and
during the years in question (1999 and 2000). They
were also 50-percent partners in a partnership that
advanced funds, both directly and indirectly (through
Ps) to the S corporation in 1997-2000. The issue for
decision is whether all or a portion of those advances
resulted in loans from the partnership to Ps and from
Ps to the S corporation, thereby providing Ps with
sufficient bases in the S corporation, under sec.
1366(d)(1)(B), I.R.C., to permit each P to deduct his
50-percent share of that corporation’s ordinary losses
for the years in question.
Held: Only the partnership advances through Ps
resulted in loans from the partnership to Ps and from
Ps to the S corporation, and those advances provided Ps
with sufficient bases in the S corporation to deduct
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