- 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