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Amount of Amount of
Year Wages Advances
1988 $11,008 $40,950
1989 18,000 75,600
1990 18,000 84,600
1991 18,000 87,600
The advances include the following amounts designated as an
automobile allowance:
1988 $1,300
1989 2,400
1990 5,550
1991 6,600
The advances were paid on a monthly basis as follows:
June 1988 $3,150
July 1988-Mar. 1990 6,300
Apr. 1990-Dec. 1991 7,300
Robert Randall Co. did not withhold for income tax or FICA tax
on the advances.
As of the date of trial, petitioner had not repaid any of the
advances. The advances were not evidenced by notes, nor was
collateral given. Nor did Robert Randall Co. inquire into
petitioner's ability to repay the advances. There were no specific
repayment terms or fixed maturity dates. Rather, the advances were
to be charged against petitioner's share of profits of partnerships
to be formed between petitioner and Robert Randall.
Respondent determined that the advances petitioner received
from Robert Randall Co. constitute taxable compensation for
services. Petitioners claim that the advances were nontaxable
loans. Except for 1988, petitioners bear the burden of proving
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Last modified: May 25, 2011