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evidence offered by petitioner consists of bills of sale from the
partnerships to the Ranches corresponding to the cattle that
petitioner claims were transferred in payment on the notes. The
bills refer to the cattle as "registered shorthorn heifers". The
bills of sale do not indicate the partnerships' basis in any of
the cattle. The facts in this record do not show that the
partnerships made payment on the notes with cattle other than
those with a zero basis as stipulated. Accordingly, they must
recognize gain in the amounts of the payments of interest and
principal on the notes.
Petitioner's argument concerning the terms of the agreement
and stipulation is not entirely clear, and we will briefly
address the alternate argument we think he may be attempting to
make. The argument can be summarized as follows. The agreement
sets out the number of cattle subject to depreciation on an
annual basis. As stated in the petition, the partnerships sold
registered shorthorn heifers that had been held for breeding
purposes for over 24 months in payment of the notes. These
cattle would be depreciable. Because the number of cattle
subject to depreciation does not decrease in correlation to the
cattle transferred in payment on the notes, the agreement does
not provide the partnerships with sufficient cattle to make such
payments. Therefore, the payments could not have been made under
the binding terms of the agreement.
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