- 13 -13
Petitioners argue that the unreported fuel reimbursement
checks should not be included in gross income because the checks
were repayments of a loan made from AJF to J.C. Penney for
expenses incurred by AJF on behalf of J.C. Penney. It is true
that we have previously held that "'where a taxpayer makes
expenditures under an agreement that he will be reimbursed
therefor, such expenditures are in the nature of loans or
advancements and are not deductible as business expenses.'"
Canelo v. Commissioner, 53 T.C. 217, 224 (1969) (quoting Patchen
v. Commissioner, 27 T.C. 592, 600 (1956)), affd. 447 F.2d 484
(9th Cir. 1971).
Nevertheless, as respondent points out, AJF deducted amounts
for fuel reimbursement expenses on its 1988, 1989, and 1990 tax
returns which persistent course of action is inconsistent with
petitioners' assertion that the reimbursements were repayments of
a loan. We have also held that "Taxpayers are entitled to attack
the form of their transactions only when their tax reporting and
other actions have shown an honest and consistent respect for
what they argue is the substance of the transactions." FNMA v.
Commissioner, 90 T.C. 405, 426 (1988), affd. 896 F.2d 580 (D.C.
Cir. 1990).
Neither AJF's cash disbursements journal nor other
accounting records treated the fuel reimbursements as loan
repayments. Had AJF intended to treat the fuel reimbursement
arrangement as a loan, it would not have claimed deductions for
fuel expenses.
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