- 48 -
operation of the taxpayer's trade or business. Welch v. Helvering,
290 U.S. 111, 113 (1933).
The test of deductibility of payments made for services is
whether the payments are reasonable and are in fact payments purely
for services which are actually rendered. Achiro v. Commissioner,
77 T.C. 881, 903 (1981); sec. 1.162-7(a), Income Tax Regs. What
matters is the nature of the services performed, and not the label
put on them by the payor and the payee. Estate of Boyd v.
Commissioner, 76 T.C. 646, 658 (1981) (and cases cited therein).
Petitioners bear the burden of proving what portion of the fees is
allocable to deductible expenses. Id.
Petitioners contend that SCS "rendered continuous, substantial,
and valuable consulting services to Powertex" and consulted with
Powertex on "marketing, advertising, business planning, customer
development, new products, finance, etc." Petitioners, however,
submitted no records in evidence reflecting services performed by
SCS. Mr. Podd testified that he would call Mr. Clark at all hours
of the day and night seeking "direction, leadership, [and] knowledge
of the industry".
Neither party called Mr. Clark to testify at trial. Respondent
contends that petitioners' failure to call Mr. Clark allows us to
conclude that his testimony would not have supported their
arguments.
If a witness is equally available to both parties and neither
party calls that witness at trial, then no adverse inference is
Page: Previous 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 NextLast modified: May 25, 2011