Bobby E. Syphrett and Janice D. Syphrett - Page 9

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          taxation by use of large deductions that were available to                  
          Intrastate.  Respondent also argues, with respect to petitioners'           
          alternative argument, that neither section 162 nor section 212              
          lets petitioners deduct the $497,667 amount.                                
               Turning first to petitioners' primary argument, we agree               
          with respondent.  Our detailed review of the record persuades us            
          that petitioners' 1989 gross income includes the full amount of             
          the Net Settlement Proceeds.  We look to petitioners' outward               
          manifestations with respect to these proceeds, and we see that              
          they received these proceeds on February 28, 1989, without any              
          restricted use.  Petitioners deposited the check into their                 
          personal account, and they used the proceeds for several months             
          before transferring any money to Intrastate.  Petitioners                   
          transferred the money to Intrastate in several installments that            
          extended over a period of 4 months, rather than through a lump              
          sum at or near the date of settlement, and the first installment            
          was carefully crafted to fall within Intrastate's taxable year              
          beginning July 1, 1989.  If part of the settlement proceeds                 
          belonged to Intrastate, as petitioners contend, it was entitled             
          to its share immediately upon settlement.  Yet, petitioners                 
          controlled all the proceeds, even investing at least $197,500 of            
          the Net Settlement Proceeds in their personal brokerage account,            
          exposing this amount to the same risks as their personal                    

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