Michael L. Medkiff - Page 2




                                        - 2 -                                         
                                     Background                                       
               Petitioner resided in Los Angeles, California, when his                
          petition was filed.                                                         
               During 2002 (and apparently in 2003 as well), petitioner               
          owned a 90-percent interest in Great American Poolcare, LLC                 
          (Great American).  Great American filed a Form 1065, U.S. Return            
          of Partnership Income, for 2002, which reported a loss of                   
          $166,743.2  Great American attached to its 2002 return a Form               
          4562, Depreciation and Amortization, that reported a tentative              
          section 179 deduction of $21,028.  However, because of the                  
          applicable business income limitation,3 the deduction was not               
          claimed on Great American’s 2002 return or utilized in the                  
          calculation of Great American’s 2002 loss.  Instead, Great                  
          American carried over its tentative 2002 section 179 deduction to           
          2003.                                                                       
               Sometime before August 29, 2005, respondent examined                   
          petitioner’s 2002 and 2003 returns, including petitioner’s                  
          distributive share of Great American’s 2002 net loss.  On                   

               2Respondent ultimately conceded the audit adjustments to               
          Great American’s 2003 return.  Consequently, the record does not            
          include the details of Great American’s return for 2003.                    
               3Under sec. 179(b)(3), the amount allowed as a deduction is            
          limited to the taxpayer’s aggregate taxable income derived from             
          the active conduct of a trade or business.  Since Great American            
          reported a loss, it could not claim the deduction under sec. 179.           
          Sec. 179(b)(3)(B) allows a taxpayer to carry over an unused                 
          deduction to future years in which the taxpayer reports taxable             
          business income.                                                            






Page:  Previous  1  2  3  4  5  6  7  8  9  Next 

Last modified: March 27, 2008