The Cleveland Trencher Company - Page 11

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          alien, is a U.S. person.  Sec. 7701(a)(30)(A).  Since Mr. Aydin             
          owns more than 50 percent of petitioner, he and petitioner would            
          be related taxpayers under section 267(b)(2).  Mr. Aydin has the            
          burden of establishing that he is not a cash basis taxpayer,                
          North Am. Serv. Co. v. Commissioner, 33 T.C. 677, 696-697                   
          (1960),5 remanded on compromise, 7 AFTR 2d 1244, 61-1 USTC par              
          9352 (7th Cir. 1961), cited for this point in Liflans Corp. v.              
          United States, 182 Ct. Cl. 825, 841, 390 F.2d 965, 974 (1968),              
          and he has not met that burden.  Indeed, his Federal personal               
          income tax return for 1989 indicates that he is a cash basis                
               Petitioner admits that the subject $168,099 was not paid               
          during the year in issue.  Neither Mr. Aydin nor AA&H included              
          the subject commission in income.                                           
               Section 267(a)(2) does not allow a payor to deduct an amount           
          before it is included in the payee's gross income where:  (a) By            
          reason of the payee's method of accounting, the amount is not               
          gross income to the payee until paid, and (b) the payor and payee           
          are related taxpayers within the terms of section 267(b).  If               
          AA&H is a sole proprietorship, both these requirements would be             

               5The Court of Appeals for the Seventh Circuit in North                 
          American Service Co. v. Commissioner ordered this case remanded             
          and disposed of in accordance with a stipulated settlement.  As             
          this Court has previously noted, this remand does not affect the            
          vitality of the opinion as an expression of the Tax Court's views           
          on the issue involved.  See Cosmopolitan Credit Corp. v.                    
          Commissioner, T.C. Memo 1972-103 n.4.                                       

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