- 18 -
return, and rejected the informal claim made by or on
behalf of petitioners during the audit that the payments
are not includable in WAI's income. Petitioners bear the
burden of proving that respondent's determination is in
error. Rule 142(a), Tax Court Rules of Practice and
Procedure (hereinafter all Rule references are to the Tax
Court Rules of Practice and Procedure).
Petitioners argue that respondent's determination is
in error because the subject payments were "never intended
to result in income" to WAI but, in fact, were made by
Weeden "to receive an equity interest". Petitioners' post-
trial brief states as follows:
Petitioner William Whelpley testified that
it was his understanding that in exchange
for these moneys, Weeden, a venture capital
investor, was to receive an equity interest.
This understanding was confirmed by the
independent testimony of Thomas Flaherty, who,
when responding to a question propounded by
the * * * [Court] stated, under penalties of
perjury that, in exchange for this investment,
Weeden expected to receive an equity interest.
Petitioners do not explicitly argue that the subject
payments constitute contributions to WAI's capital, and
they do not cite section 118(a), which provides that "gross
income does not include any contribution to the capital of
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011