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With respect to petitioner's 1992 Federal income tax return,
based on lack of substantiation, respondent disallowed all but
$9,138 of petitioner's claimed $31,796 expenses.
Also for 1992, on the ground that petitioner's divorce did
not become final in 1992, respondent determined that petitioner
had incorrectly identified his filing status on his 1992 Federal
income tax return as "single", and respondent recalculated
petitioner's income tax using the rate applicable to married
persons filing separately. Finally, respondent determined
accuracy-related penalties under section 6662(a) for 1991 and
1992.
OPINION
1991 -- $37,767 Bonus
Income includes compensation for services. Sec. 61(a); sec.
1.61-1(a)(1), Income Tax Regs. Funds received as loans, however,
are not properly treated as taxable income. James v. United
States, 366 U.S. 213, 219 (1961).
Petitioner argues that the $103,000 received from Dean
Witter in 1988 constituted a "forgivable" rather than a bona fide
loan, that the $103,000 should have been included in his income
in 1988, and that because of his obligation to immediately
transfer back to Dean Witter the annual $37,767 bonus to be
received, the $37,767 bonus petitioner received in 1991 should be
treated as nontaxable "illusory" income.
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