- 8 - third-party payment report”). Petitioners, therefore, have the burden of showing that respondent’s determination is erroneous.4 Petitioners contend that although they received the funds reported on the Forms 1099, “some or all of these funds were given to them to pay to third parties and * * * therefore * * * [they do] not believe the amounts * * * [are] their income.” We reject petitioners’ contention. It is well established that a taxpayer need not treat as income payments that he did not receive under a claim of right, that were not his to keep, and that he was required to transmit to someone else as a mere conduit. Diamond v. Commissioner, 56 T.C. 530, 541 (1971), affd. 492 F.2d 286 (7th Cir. 1974); see also Ancira v. Commissioner, 119 T.C. 135, 138 (2002); Vetrano v. Commissioner, T.C. Memo. 2000-128. However, if a taxpayer does receive a payment under a claim of right and without restriction or limitation as to the disposition of the payment, then the taxpayer has received taxable income even if it still may be claimed that he is not entitled to retain the payment and even though he may be liable to restore its equivalent. See N. Am. Oil Consol. v. Burnet, 286 U.S. 417, 424 (1932); Vetrano v. Commissioner, supra. The record does not reflect that 4In this case, petitioners do not contend that sec. 7491(a), which shifts the burden of proof to the Commissioner if its requirements are met, applies, and petitioners have not produced evidence to show they meet the requirements of sec. 7491(a). The burden of proof, therefore, remains on petitioners.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011