- 8 - explained that relying on previous practice and the issuance of Forms 1099-MISC, Miscellaneous Income, to Paul by the bookkeeping service provider, he deducted the $81,000 on Doris Kropp’s 1994 tax return. Mrs. Harte testified that she considered the $81,000 to be Paul’s wages although she had no personal knowledge of any services actually performed by Paul in 1994. As a trier of fact, it is our duty to listen to the testimony, observe the demeanor of the witnesses, weigh the evidence, and determine what we believe. See Christensen v. Commissioner, 786 F.2d 1382, 1383-1384 (9th Cir. 1986), affg. in part and remanding on another issue T.C. Memo. 1984-197; Nell v. Commissioner, T.C. Memo. 1986-246. At trial, we had the opportunity to evaluate Paul’s and Lorna’s veracity and to observe their demeanor. We found Paul and Lorna to be credible witnesses and accept their testimony that Paul did not perform any services for Doris Kropp in 1994. We believe that after her husband’s death, Doris Kropp continued to provide for Paul and his immediate family out of love and affection for them. We therefore conclude that the $81,000 withdrawal was not on account of services rendered by Paul to Doris Kropp but was instead a gift. Accordingly, we hold that Paul and Lorna are not liable for the deficiencies (including self-employment taxes) determined by respondent with regard to the $81,000 withdrawal.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011