- 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