Gary R. Fears - Page 3

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          Gateway to GFI and Gateway was dissolved.  On December 22, 2000,            
          GFI sold the euro for $20,573.                                              
               On September 6, 2001, Gateway filed a Form 1065, U.S. Return           
          of Partnership Income, relating to the tax year beginning October           
          27, 2000, and ending December 21, 2000.  The Form 1065 showed               
          distributions of property other than money in the amount of                 
          $5,020,000 (i.e., the $5 million paid for the long options and              
          the purchase price of the euro).  On June 28, 2001, GFI filed a             
          Form 1120S, U.S. Income Tax Return for an S Corporation, relating           
          to 2000.  The Form 1120S showed a $4,999,427 loss relating to               
          foreign currency (i.e., a purported basis of $5,020,000 in the              
          foreign currency and a $20,573 amount realized).                            
               On October 22, 2001, petitioner filed his 2000 Federal tax             
          return and reported a net operating loss of $4,146,903 relating             
          to GFI’s foreign currency loss.  On August 12, 2002, petitioner             
          filed his 2001 Federal tax return and reported a net operating              
          loss of $4,146,903 and an overall loss of $2,948,966.  On June              
          28, 2004, respondent sent Gateway, GFG, and GFI Notices of Final            
          Partnership Administrative Adjustment (FPAAs) relating to 2000.             
          On November 26, 2004, petitioner filed a petition relating to the           
          FPAA issued to Gateway.  The Court, however, dismissed that                 
          petition because it was not filed by a proper party.                        
               On August 10, 2005, respondent sent petitioner a notice of             
          deficiency relating to 2001.  Respondent disallowed petitioner’s            

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