Earl E. Cloud, Jr. and Sheila S. Cloud - Page 14




                                       - 14 -                                         
          depreciation than were claimed on the returns, apparently                   
          reducing the claimed depreciable basis by certain items that                
          petitioners now concede were never moved from Fyffe.                        
               Petitioners have introduced no books or records to                     
          substantiate or explain their claimed depreciable basis, even               
          though petitioner testified that he kept books and records which            
          he supplied to his accountant.8  We draw an adverse inference               
          from petitioners’ failure to introduce such evidence that is                
          within their possession.  Cf. Citron v. Commissioner, 97 T.C.               
          200, 217-218 (1991); Wichita Terminal Elevator Co. v.                       


               7(...continued)                                                        
          repossessed the equipment--petitioners reported opening basis of            
          $79,448, an increase in basis of $50,000, and their amount at               
          risk as $129,448.  For taxable year 1991–-after petitioners no              
          longer possessed the equipment–-petitioners reported their                  
          adjusted basis in the equipment and their amount at risk as                 
          $31,942.                                                                    
               8 For at least some of the years in issue, petitioners                 
          appear to compute their depreciable basis by reference to the               
          provision in the September 1988 bill of sale, which purported to            
          limit petitioner’s liability to Venco for assumption of the debt            
          outstanding on the property to no more than $165,000.  This                 
          $165,000 liability limit, however, approximates petitioner’s                
          personal liability as previously agreed to under the settlement             
          agreement with petitioners’ and Pacer’s various creditors.  We              
          question whether petitioner assumed any such liabilities pursuant           
          to his purchase of the equipment from Venco and consequently                
          whether such liabilities are appropriately included in                      
          petitioner’s depreciable basis in the equipment. Furthermore, we            
          question the bona fides of the various purported transfers of the           
          manufacturing equipment from Pacer to Venco and then to                     
          petitioner.  The record does not explain why Venco, having                  
          purportedly purchased the equipment from Pacer in July 1988 for             
          $598,500, would then sell the equipment back to petitioner in               
          September 1988 for $10 stated consideration, with the parties               
          agreeing that petitioner’s liabilities would not exceed $165,000.           





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