Sid Paul Ruckriegel - Page 15

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          loans to petitioners reflect meeting dates of December 18, 1997,            
          April 20, 1999, and November 12, 1999, the dates of petitioners’            
          promissory notes.                                                           
               Petitioners also executed partners minutes reflecting an               
          April 1, 1997, meeting of the Paulan partners (a date prior to              
          any of the Paulan bank borrowings or advances to Sidal or                   
          petitioners).  Those minutes, in effect, provide advance                    
          authorization for any future Paulan loans to petitioners for the            
          purpose of enabling them to relend the funds to Sidal and for               
          those loans to take the form of direct payments to Sidal.                   
               None of the Sidal or Paulan minutes described herein                   
          (collectively, the minutes) were drafted and executed earlier               
          than June 2000, and the minutes describing an October 31, 2000,             
          Sidal board of directors meeting were drafted and executed                  
          sometime after October 31, 2000.                                            
          Stock Basis                                                                 
               Petitioners’ adjusted tax bases in their Sidal stock were              
          zero as of January 1, 1999, 2000, and 2001.                                 
                                       OPINION                                        
          I.  Introduction                                                            
               Respondent disallowed each petitioner’s deduction of his 50-           
          percent share of Sidal’s ordinary losses for 1999 and 2000 on the           
          ground that petitioners had zero bases for their respective                 
          investments in Sidal.  Each petitioner’s basis in Sidal depends             






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