- 74 -
organizational costs and syndication expenses must be
capitalized. Organizational costs, if elected, are amortizable.
See secs. 263, 709. Petitioners have the burden of proving what
portion of the fee is allocable to nondeductible capital portions
and to deductible expense portions, and such allocation must
reasonably comport with the value of the services performed. See
Durkin v. Commissioner, supra at 1389. Any fees for services to
be rendered in the future are not deductible in the year of
expenditure. See id. Whether payments to a partner represent a
reasonable compensation for services is a question of fact to be
determined on the basis of the particular circumstances of each
case. See id.
In the instant cases, the evidence presented on the payments
these partnerships made to Jay Hoyt is most unsatisfactory. The
record includes a copy of DGE 84-3's partnership agreement. It
provides that the managing general partner, Jay Hoyt, is to
receive a fee equal to 5 percent of that partnership’s profits.
Copies of the partnership agreements of the other partnerships
for the years in issue are not in the record. However, Jay Hoyt
testified that he received a fee equal to 1 percent of a
partnership’s gross farm income.
Petitioners have failed to establish that the alleged
payments each of these partnerships made to Jay Hoyt are
deductible under section 162(a) by that partnership. Petitioners
Page: Previous 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 NextLast modified: May 25, 2011