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were incurred in defending suits from the restaurants' creditors.
Respondent disallowed the claimed expenses for all 4 years.
In addition, petitioner claimed medical expenses in the
amount of $3,524 for amounts paid on behalf of his mother, Edith
Beretta, in 1990. Respondent determined that Edith Beretta was
not a dependent of petitioner and accordingly denied petitioner's
deduction for the claimed medical expenses.
OPINION
Issue 1. Skimmed Proceeds
Initially, we must decide whether petitioner's receipt of
cash from the two restaurants constituted taxable income. The
accuracy of respondent's bank deposits analysis is not at issue
because petitioner has conceded that he has received
approximately $103,000 in cash from the Salinas and Atascadero
Peppertree Restaurants during the years at issue.
Petitioner claims that the skimmed proceeds were repayment
for amounts loaned to the two restaurants, and, therefore, the
receipt of the cash constituted a nontaxable repayment of the
loan principal. In addition, Mr. Beretta contends that he
received no interest on the amounts lent. Respondent contends
that the transfers of funds to the restaurants were not loans and
that petitioner's receipt of the skimmed proceeds constituted
taxable income. We agree with respondent.
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