Thai V. Pham and Khuy T. Bui - Page 11

                                       - 11 -                                         
          discarded his records after petitioner Bui paid him.  Dung later            
          testified that he retained his records until he filed his Federal           
          income tax return.  Dung also testified that his work activity              
          records were destroyed after petitioner Bui paid him but that he            
          then created a new record reflecting the amount he was paid.                
          Dung further testified that this new record was discarded only              
          after he completed his tax return.                                          
               The testimony of both Duy and Thinh, though not as explicit            
          as is Dung's testimony, is equally obscure.  In any event, no               
          records were produced.  Further, all testimonial evidence is                
          tenuous in respect to the relevant points.                                  
               Petitioners correctly explain that in Eller v. Commissioner,           
          77 T.C. 934 (1981), this Court held that compensation is                    
          deductible under section 162(a)(1) only if it is: (1) Reasonable            
          in amount; (2) provided for services actually rendered; and (3)             
          paid or incurred.  But the burden is on petitioners to prove that           
          they are entitled to the deduction claimed.  Rule 142(a); Welch             
          v. Helvering, supra.  Even if we were convinced that petitioners            
          paid reasonable amounts to their sons for their involvement in              
          the enterprise, we remain unpersuaded as to the amount of                   
          compensation paid.                                                          
               Petitioners contend that the Cohan rule, Cohan v.                      
          Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), should be used           
          to bridge this gap.  We disagree.  According to the Cohan rule,             
          if the record provides sufficient evidence that the taxpayer has            

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011