David D. Parrish - Page 10

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          the amount of the expense.  M&L did not file Federal income tax             
          returns for the years in issue.  Moreover, petitioner did not               
          present sufficient evidence to establish his basis in M&L or                
          estimate the amount of M&L's losses.  Under such circumstances, a           
          deduction based on the Cohan rule would be "'unguided largesse.'"           
          Epp v. Commissioner, 78 T.C. 801, 807 (1982) (quoting Williams v.           
          United States, 245 F.2d 559, 560 (5th Cir. 1957).  Accordingly,             
          we conclude that petitioner has failed to meet his burden of                
          proof and hold that he is not entitled to claim losses relating             
          to M&L.                                                                     
          III.  Self-Employment Tax                                                   
               Section 1401(a) imposes a tax on the self-employment income            
          of every individual.  Self-employment income consists of the net            
          earnings from a trade or business carried on by an individual               
          through a sole proprietorship or as a partner.  Sec. 1.1401-1(c),           
          Income Tax Regs.                                                            
               Respondent determined that during the years in issue M&L               
          paid petitioner $477,071.27 that is subject to self-employment              
          tax.  We conclude that $216,000 of the $477,071.27 received is              
          appropriately characterized as either interest or dividends                 
          (i.e., the total amount of $6,000 monthly payments) and $36,000             
          is appropriately characterized as salary (i.e., the total amount            
          of $1,000 monthly payments which petitioner used to lease a                 
          Cadillac).  Therefore, $252,000 (i.e., $216,000 + $36,000) is not           





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