William Whelpley, Jr. - Page 18

                                        - 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             they do not cite section 118(a), which provides that "gross               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  Next

Last modified: May 25, 2011