- 9 -
forbearance of money. Instead, the Court found that the payments
were made to conceal the fraudulent misappropriation of the
taxpayers' investment.
Greenberg v. Commissioner, supra, however, is
distinguishable from this case. Petitioner was not a passive
investor but was a director and officer of M&L who encouraged
investors to transfer over $1 million to M&L. Moreover,
petitioner failed to provide sufficient evidence to establish the
amount of funds that he allegedly loaned to, or the amount of
funds he received from, M&L. Accordingly, we hold that
petitioner failed to report income.
II. Losses Relating to M&L
Petitioner contends that, in his capacity as an S
corporation shareholder, he is entitled to deduct 20 percent of
M&L's losses for the years in issue. See sec. 1366(a)(1); see
also sec. 1366(d)(1) (limiting such deductions to the
shareholder's adjusted basis in the corporate stock). While
petitioner bears the burden of establishing that M&L actually
incurred losses for the years in issue, Burke v. Commissioner,
T.C. Memo. 1995-608, he has failed to produce sufficient evidence
to substantiate such losses. Nevertheless, he contends that this
Court should apply the rule of Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930), which provides that when taxpayers
establish that they incurred an expense, the Court may estimate
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