- 17 -
equal to the amount of personal living expenses petitioner paid
by drawing checks against Fruitland's checking account during the
taxable year, plus the entire amount of the cashier's checks
purchased by petitioner during the taxable year, less the entire
amount of the cashier's checks negotiated during the taxable
year, less the amount of income reported as received from
Fruitland on petitioners' tax return in the form of a guaranteed
payment.
With three exceptions, these two formulas are equivalent.
Respondent's formula differs from petitioners' formula in that it
includes in the computation the entire amount of the cashier's
checks purchased and maintained by petitioner. Petitioners, on
the other hand, contend that the computation should consider only
one-half of that amount. Whereas respondent's proposal is
consistent with her theory that petitioner purchased the
cashier's checks with embezzled funds, the proposal advanced by
petitioners is consistent with their argument that the cashier's
checks represent partnership property. In any event, as a
consequence of having concluded that the cashier's checks
remained partnership assets and that petitioner did not embezzle
the funds that he used to purchase such checks, we find that only
one-half of the amount of the cashier's checks is to be
considered in the computation of unreported income for each
taxable year.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011