- 13 - payable to petitioner, have the word “Draw” written in the space for “Description”, and specify a check amount in round hundred- dollar increments. Petitioner does not dispute that these and similar checks totaled $10,640, $64,400, and $52,200 for 1988, 1990, and 1992, respectively. However, for December of 1990, no copies of the checks drawn on Bicycle Sport’s account were made available to respondent. Because the bank statements for December showed two checks in even amounts similar to those identified as draws, respondent concluded that these, too, represented nondeductible draws of an additional $8,500. Petitioner has offered no evidence establishing that the amounts treated as draws should in fact be characterized as deductible expenditures. Rather, petitioner’s testimony at trial seems to indicate that these sums were in fact owner draws but that petitioner holds a misguided interpretation of the income tax consequences thereof. For instance, the discussion set forth below illustrates petitioner’s apparent position. MR. COHEN: I’m saying that some of those came-- some of that came from--as a draw on equity, which I’m legally entitled to do as a nontaxable event. If I have that money that I’ve put into the business, then I’m allowed to take that back out and not declare that as--that doesn’t have to necessarily be a taxable event. * * * * * * *Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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