Strong v. Commissioner

66 T.C. 12 (1976)

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Strong v. Commissioner

United States Tax Court
66 T.C. 12 (1976)

Facts

William Strong and several others (partners) (plaintiffs) formed a partnership, Heritage Village Apartments Company (Heritage partnership), to build and operate an apartment complex. The property was transferred to a corporation, Heritage Village, Inc. (Heritage corporation), which was wholly owned by the partnership. This transfer was done to obtain a mortgage loan that avoided the New York state usury statute, which permitted a higher interest rate for loans to corporations. The Heritage partnership’s tax returns reported the net operating losses resulting from the construction and operation of the apartment complex during the tax years at issue. The Heritage corporation reported only that its principal business was as a nominee and that it had no income, losses, assets, or liabilities. The commissioner of the Internal Revenue Service (defendant) determined that the Heritage corporation was the entity that should have reported the net operating losses. The partners appealed this determination to the United States Tax Court.

Rule of Law

Issue

Holding and Reasoning (Tannenwald, J.)

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Casebooks

Federal Income Tax

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