- 14 -
payments are taxable to petitioners, respondent asserts that, in
1991, petitioner controlled Aldergrove partnership matters and
that petitioner benefited from and controlled the funds in the
Aldergrove account. Respondent relies on Monahan I and the
doctrine of issue preclusion to establish those underlying facts.
In Monahan I, this Court considered the Commissioner's
determination of deficiencies in and additions to petitioners'
Federal income tax for 1984, 1985, 1986, 1987, and 1988. This
Court, among other things, found that petitioner's purported
repayment of his negative capital account in a partnership, Span
Services, lacked economic substance and that petitioner, thus,
recognized gain on the termination of his interest in that
partnership. In rejecting petitioner's assertion that he had an
obligation to repay Aldergrove for its payment of an obligation
incurred to repay the negative capital account, this Court
stated:
Petitioners contend that petitioner then had an
obligation to “contribute” to or repay Aldergrove as a
result of its satisfaction of the joint $400,000
obligation. However, there was no written agreement
regarding such an obligation. Petitioner's purported
payments to Aldergrove on that “obligation” also lacked
economic substance or remained in petitioner's control
by virtue of his control over Aldergrove. Petitioner's
first payment was made 2 years later, on February 25,
1988, when he transferred $125,000 to an Aldergrove
account over which he had signature authority. On the
same day, pursuant to petitioner's instructions
Aldergrove transferred $110,200 to Hansa Finance and
Trust, B.V. (Hansa Finance), an entity wholly owned and
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011