- 11 - claimed on their return.7 Petitioners contend that various debts of the partnerships arose when loans were made by petitioners to ISI which, in turn, made loans to each of the various partnerships in which both ISI and Mr. Bach held interests. Further, petitioners contend that the loans receivable from the partnerships recorded on ISI's books would be reduced at the end of the year and a corresponding increase in salary or officer's compensation expense would be made on the books which represented payment to Mr. Bach by the same amount. Petitioners also contend that each of the alleged payments made to them was recorded as income on their income tax return for each year. Petitioners ultimately contend that through this process, they were in essence making the loans to the various partnerships and that these loans were never paid back nor credited to petitioners' capital accounts. Mr. Bach testified that no written loan agreements ever existed between ISI and any partnership or between petitioners and any of the partnerships. On brief, petitioners attached documents which purport to summarize loans totaling $1,042,809.42 7Sec. 166(a) provides that there shall be allowed as a deduction any debt which becomes worthless during the taxable year. Petitioners bear the burden to establish: (1) The existence of a bona fide debt; (2) the amount of the debt; (3) that the debt was incurred in or was created or acquired in connection with Mr. Bach's trade or business; and (4) that the debt became worthless at least in part during the taxable year. Sec. 166(a), (d)(2); Rule 142(a); secs. 1.166-1(a), (c), 1.166- 5(b), Income Tax Regs.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011