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Respondent increased petitioners' taxable income accordingly.
After concessions by respondent, a single $25,000 deposit remains
in dispute. The issue is whether that deposit is taxable to
petitioners.
B. Analysis
On December 26, 1991, petitioner transferred $25,000 from an
account held by Group M at SP Bank to an account held by
petitioners at the same bank (the payment). Petitioners, citing
Ingalls v. Patterson, 158 F. Supp. 627, 641-642 (N.D. Ala. 1958),
argue that the payment “represents a reimbursement of legal fees
paid by Petitioner on behalf of Group M Construction so that the
reimbursement is not income to Petitioner.” Respondent argues
that petitioners have failed to substantiate their explanation of
the payment. The parties' presentation of the issue with respect
to the $25,000 deposit requires this Court to examine only the
facts relating to the payment. Respondent does not contest the
legal basis upon which petitioners exclude that payment from
their income for 1991.
Timothy Monahan testified that, although petitioner did not
present any documents to Group M demonstrating the amount of the
legal expenses to be reimbursed, he was convinced that petitioner
spent at least $25,000 and, thus, authorized the payment. At
trial, petitioner stated that he did not remember the exact
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