Oliver W. and Edna D. Wilson, (2002)
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Oliver W. and Edna D. Wilson, (2002)
T.C. Memo. 2002-61
UNITED STATES TAX COURT OLIVER W. AND EDNA D. WILSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 3620-96, 3621-96. Filed March 5, 2002.Oliver W. Wilson, pro se. Roger P. Law, for respondent.MEMORANDUM FINDINGS OF FACT AND OPINION MARVEL, Judge: In separate notices of deficiency for 1992 and 1993, respondent determined the following deficiencies and accuracy-related penalties for negligence with respect to petitioners' Federal income taxes:Penalty Year Deficiency Sec. 6662(b)(1) 1992 $19,181 $3,8361993 24,707 4,941Petitioners filed a petition to redetermine the deficiency and penalty for 1993 and a second petition to redetermine the deficiency and penalty for 1992. We consolidated these cases for purposes of trial, briefing, and opinion pursuant to Rule 141(a)1because they present common questions of fact and law. For convenience, these cases hereinafter are referred to as this case.After concessions,2 the issues for decision are as follows: (1) Whether petitioners are entitled under section 162(a) to deductions claimed on Schedules C, Profit or Loss From Business, for 1992 and 1993 with respect to a purported restaurant/nightclub business and, if so, in what amounts; (2) whether petitioners are entitled under section 167 to deduct depreciation expenses claimed with respect to two purported rental real properties for 1992 and 1993 and, if so, in what amounts; (3) whether petitioners are entitled under section 162 or 212(2) to deduct on Schedule E, Supplemental Income and Loss, expenses with respect to their two purported rental properties for 1992 and 1993 and, if so, in what amounts; (4) whether petitioners are entitled to deduct under section 172 certain net operating losses they had computed with respect to 1990 and 1991 and carried forward to 1992 and 1993 and, if so, in what amounts; (5) whether petitioners are liable under section 6662(a) and (b)(1) for accuracy-related penalties for negligence for 1992 and 1993.FINDINGS OF FACT Some of the facts have been stipulated and are so found. The stipulation of facts, first supplemental stipulation of facts, and second supplemental stipulation of facts are incorporated herein by this reference.Petitioners, who filed joint Federal income tax returns for 1992 and 1993, resided in Los Angeles, California, when they filed their petitions in this case.Background On or about September 22, 1980, Oliver W. Wilson (petitioner) and his brother, Fred L. Wilson (Fred), purchased commercial real property located at 5401-9 S. Broadway, Los Angeles, California (the 5401-9 S. Broadway property), for a total purchase price of $130,000, consisting of a $30,000 cash downpayment and a deed of trust to the sellers for the remaining $100,000. In 1985, Fred deeded his interest in the 5401-9 S. Broadway property to petitioner for approximately $65,000. Later that year, petitioner paid off the deed of trust on the property.The 5401-9 S. Broadway property consists of a two-story building and a large parking area. The building, which was constructed in 1922, has a total floor area of approximately 27,000 square feet, or 13,500 square feet per floor. From the 1920s until 1968, the first floor of the building contained various retail businesses. The second floor contained a nightclub/ballroom facility known as the '5-4 Ballroom'. Following World War II, the 5-4 Ballroom became a popular entertainment venue among Black entertainers and patrons in the Los Angeles area and featured primarily Black entertainers and musicians, including a number of prominent blues and jazz art...See the full content of this document
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