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and 1991 tax years. Consequently, we sustain respondent’s
determinations in the FPAA’s disallowing DF #1, SGE 82-1, and DGE
84-3 those deductions for the 1990 and 1991 tax years. See Rules
142(a), 240(a).
Issue 4. Deductions for Guaranteed Payments
Petitioners assert that DF #1, SGE 82-1, DGE 84-3, SGE 84-5,
DGE 86-2, TBS 89-1, and TBS 90-1 are entitled to deductions for
the years in issue for certain guaranteed payments made to Jay
Hoyt during those years.
Section 707(c) allows a deduction for a partnership for
guaranteed payments to partners. Such payments are determined
without regard to the partnership income and are payments to a
partners for services or the use of capital. See sec. 707(c).
To be deductible by the partnership, the guaranteed payments must
meet the requirements of section 162; they must be ordinary and
necessary expenses, reasonable in amount, and incurred in a trade
or business. See Durkin v. Commissioner, 87 T.C. 1329, 1376-1377
(1986), affd. 872 F.2d 1271 (7th Cir. 1989); sec. 1.707-1(c),
Income Tax Regs.
In deciding whether the payments are deductible under
section 162(a), the Court must look to the nature of the services
performed by the general partners rather than to their
designation or treatment by the partnership. See Durkin v.
Commissioner, supra at 1388-1389. Payments allocable to
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