Venture Funding, Ltd. - Page 8

                                        - 8 -                                         
          section 1.61-2(d), Income Tax Regs., relating to compensation               
          paid other than in cash, apply to transfers of property "to the             
          extent such rules are not inconsistent with section 83").  We               
          also understand that petitioner may deduct the value of the                 
          transferred property when the corresponding value is "included in           
          the gross income of the [persons] who performed such services."             
          Because none of petitioner's employees included the corresponding           
          amount in his or her 1988 income, it follows that petitioner may            
          not deduct any of the claimed amount in that year.  Whereas                 
          petitioner would have us read section 83(h) to allow it a                   
          deduction in 1988 for the amount of income that was includable in           
          its employees' income for 1988, we decline to do so.  An amount             
          is deductible under section 83(h) in the year that the                      
          corresponding income is "included" in the recipient employee's              
          income, which means to us that the amount is taken into account             
          in determining the tax liability of the employee for that year.             
          See S. Rept. 91-552, supra at 262, 1969-3 C.B. at 502                       
          ("The deduction [under section 83(h)] is to be allowed in the               
          employer's accounting period which includes the close of the                
          taxable year in which the employee recognizes the income"); see             
          also Lenz v. Commissioner, 101 T.C. 260, 265 (1993) ("'Allowable            
          deduction' generally refers to a deduction which qualifies under            
          a specific Code provision whereas 'allowed deduction', on the               
          other hand, refers to a deduction granted by the Internal Revenue           
          Service which is actually taken on a return and will result in a            




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011