- 12 - owed rent to either Mesa or Teton. Respondent has drawn our attention to evidence in the record that tends to suggest that Cheyenne had a sharecrop arrangement with Mesa under which a cash payment of rent would not ordinarily be due. Because we find that petitioner has failed to substantiate that either he or Cheyenne was obligated to make the payments,6 or that Mesa or Teton actually received them, we uphold respondent’s determination that petitioner is not entitled to a deduction of $110,000 for payment of rents owed to Mesa and Teton. Issue 2: Petitioner’s Unreported Income Cheyenne, an S corporation whose shares were owned by petitioner, conducted farming activities through 1988. ASCS owed Cheyenne a disaster payment of $37,723. In 1989, this amount was distributed by ASCS to creditors of Cheyenne, CCC and SBA, in the amounts of $34,171 and $3,552, respectively. Cheyenne was also entitled to a Federal crop insurance payment in the amount of $43,496. In 1989, this amount was distributed by the payor to AG Services, a creditor of Cheyenne that had furnished goods and services to Cheyenne for use in its farming activities. 6 In the absence of a personal obligation of petitioner, the payments by petitioner would be treated as capital contributions to Cheyenne, and constructive payments by Cheyenne to the payees. Because Cheyenne was an S corporation whose shares appear to have been owned by petitioner during 1989, any loss arising from deductible payments constructively made by Cheyenne would properly flow through to petitioner for Federal income tax purposes.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011