Slip opinions decided 1997 — Tax Court Memorandum

Held: Ps' motion for administrative and litigation costs will be denied.

P signed a power of attorney (POA) in 1988 naming B as his representative. In April 1991, P was totally incapacitated by a stroke. Held: The Form 872 signed in 1992 is ineffective to extend the SPL, because the POA under which B acted was revoked by P's incapacity and R had actual knowledge of the incapacity. Held, further, the SPL for 1984, 1985, and 1986 had expired when the notice was mailed, unless the underpayments of tax for those years were due to fraud.

In 1993, R issued a notice of deficiency for Ps' 1989 taxable year. Held: Petitioners' motion for leave will be denied.

On the facts, Held: Ps have failed to sustain their burden of proving that H did not materially participate in the activity of CDI during 1990 and 1991 within the meaning of sec. 469(h) (1), I.R.C.,… Held: Ps have failed to sustain their burden of proving that H did not materially participate in the activity of CDI during 1990 and 1991 within the meaning of sec. 469(h) (1), I.R.C., and sec. 1.469-5T(a) (1), Temporary Income Tax Regs., 53 Fed.

After requesting a legal separation from his wife, but before a Stipulation and Order to Show Cause was filed on May 6, 1992, in State court, P made certain payments to, or on behalf of, his wife in the nature of support. P deducted these payments, together with payments made after May 6, 1992, from his gross income as alimony pursuant to sec. 215, I.R.C., on his Federal income tax return for 1992. R limited P's alimony deduction to those payments made after May 6, 1992. On the facts, Held: No alimony deduction is allowed under sec. 215, I.R.C., for payments made by petitioner to his wife prior to May 6, 1992, since these payments did not stem from a written separation agreement within the ambit of sec. 71(b)(2)(B), I.R.C.

CALIFORNIA HOTEL & CASINO AND SUBSIDIARIES, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 3434-95 Ps provide free meals to their employees in private… Held: Ps' deduction is limited by sec. 274(n)(1), I.R.C.; the de minimis fringe benefit exception of sec. 274(n)(2)(B), I.R.C., is inapplicable under the facts herein because Ps do not provide the meals to each of substantially all of their employees for a substantial noncompensatory business reason.

Loren B. Mark, for respondent.

John T. Lortie, for respondent.

James P. Thurston, for respondent.

M and THEI were partners in IHCL. IHCL was formed in 1981 to hold interests in both PGL and PLH, which were partnerships formed for the purpose of constructing, owning, and managing separate hotel towers of a resort complex located adjacent to the then-unbuilt San Diego Convention Center. IHCL's partnership agreement provided that upon liquidation, the liquidation proceeds would be distributed only to those partners having positive capital accounts. IHCL's partnership agreement did not require the partners to restore any deficits in their capital accounts upon liquidation of the partnership. In 1985, D agreed to invest $<>19.8 million in IHCL in exchange for a 15-percent interest in IHCL, together with a special allocation of 99 percent of IHCL's income and losses. Upon D's entry as a partner in IHCL, M withdrew as a partner of IHCL, and THEI's interest in IHCL was reduced. D encountered financial difficulties. In 1987, the special allocation of gains and losses to D was terminated. Thereafter, the gains and losses of IHCL were allocated to THEI and D pro rata in accordance with their partnership interests. Following this allocation, a substantial deficit balance existed in THEI's partnership capital account. On June 20, 1991, M purchased D's interest in IHCL and thereafter succeeded to D's then-positive partnership capital account of $ 14.8 million. At that time, THEI had a negative $ 5.9 million partnership capital account. Upon M's reentry into IHCL, IHCL's partnership agreement was amended to provide that IHCL's income would be allocated first to partners having negative capital account balances and then to the partners pro rata. No amendment was made to IHCL's partnership agreement with respect to the allocation of losses, distributions of cash-flow, or liquidating distributions. IHCL's 1991 information return reported an allocation of 99 percent of IHCL's income to D up to June 20, 1991, and thereafter an allocation of 100 percent to THEI. Respondent determined that 99 percent of IHCL's income after June 20, 1991, should be reallocated to M as D's successor in IHCL. HELD: Respondent's reallocation of 99 percent of IHCL's income to M for the period in issue is sustained. See sec. 704(b), I.R.C.

MEMORANDUM FINDINGS OF FACT AND OPINION

Gary L. Bloom, for respondent.

Roslyn D. Grand, for respondent.

On the facts, HELD: (1) Ps have not established that they are entitled to deduct on their 1987 Federal income tax return ordinary and necessary business expenses in excess of the amount allowed by R;… Held: Ps have not established that they are entitled to deduct on their 1987 Federal income tax return ordinary and necessary business expenses in excess of the amount allowed by R; and (2) petitioners are liable for the late filing addition to tax under sec. 6651(a)(1), I.R.C.

P contributed 236 films to a charitable organization. In accord with an appraisal, P placed a $<>236,000 value on the films. Held: In the context of this case, P is not seeking to go behind the notice of deficiency and is entitled to discover and obtain a copy of Y's report.

James E. Schacht, for respondent.

Ladd C. Brown, for respondent.

Reginald R. Corlew, for respondent.

R moved for partial summary judgment on an issue informally raised by P during an IRS Appeals Office conference as to whether the period of limitations for assessment had expired as a result of R's alleged failure to honor an election by P's partnership for treatment under the unified audit provisions of secs. 6221 through 6233, I.R.C. R also moved to impose sanctions under Rule 104(c), Tax Court Rules of Practice and Procedure, including dismissal, for P's ongoing noncompliance with a discovery order of the Court. P filed oppositions to both of R's motions. 1. HELD: R's motion for partial summary judgment granted. Rule 121(b), Tax Court Rules of Practice and Procedure. 2. HELD, FURTHER, R's motion to impose sanctions granted; this case will be dismissed; and decision will be entered against P for deficiencies and accuracy-related penalties under sec. 6662(a), I.R.C., in the amounts determined by R for the taxable years 1992 and 1993. Rule 104(c)(3), Tax Court Rules of Practice and Procedure.

HELD: Petitioner did not adequately disclose on his 1988 Federal income tax return relevant facts regarding the tax treatment of a claimed business interest expense deduction. Held: Petitioner did not adequately disclose on his 1988 Federal income tax return relevant facts regarding the tax treatment of a claimed business interest expense deduction. Petitioner is liable for an addition to tax under sec. 6661, I.R.C.