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March 19, 1993, Mr. Henderson received a discharge from
indebtedness from the Bankruptcy Court.
Respondent contends that amounts paid by petitioner to, or
on behalf of, Mr. Henderson for personal expenses in 1995 and
1996 constitute wages which subject petitioner to Federal
employment taxes on those wages. Petitioner argues that the
amounts the corporation paid with respect to Mr. Henderson’s
personal expenses during the years in issue were funds advanced
by Mr. Henderson to petitioner pursuant to an oral agreement
between the corporation and Mr. Henderson. Petitioner also
contends that the amounts used by the corporation for these
payments were advanced by Mr. Henderson to petitioner in a
“trust” capacity. Petitioner contends that the oral agreement
was a means for Mr. Henderson to deposit funds with petitioner
and then have petitioner pay Mr. Henderson’s personal expenses,
thus avoiding the reach of his creditors. In the alternative,
petitioner argues that the payments of Mr. Henderson’s personal
expenses represented repayment of loans made by Mr. Henderson to
the corporation.
Section 7491 is not applicable in the instant case because
the examination commenced before July 22, 1998. Petitioner bears
the burden of proof. Rule 142(a); Welch v. Helvering, 290 U.S.
111 (1933).
We note that this Court has jurisdiction to determine
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