- 12 -
11/30/95 11/30/96 11/30/97
Food & lodging $4,290 $4,395 $12,209
Medical 1,224 1,297 4,504
Total dividends 5,514 5,692 16,713
OPINION
Issue 1. Expenses Incurred by Waterfall Farms To Provide Medical
Benefits, Food, and Housing to the Hubers in 1995,
1996, and 1997
A. Positions of the Parties3
Respondent disallowed deductions taken by Waterfall Farms
for medical costs (health insurance premiums and other medical
care expenses), food, and lodging (rent for the homestead).
Respondent asserts that the medical costs, food, and lodging
expenses are the Hubers’ personal, family, and living expenses
and that payments of these expenses by Waterfall Farms constitute
constructive dividends to the Hubers. On the other hand,
petitioners assert that all the expenditures are reasonable and
3Under certain circumstances, sec. 7491 places the burden of
proof or production on the Commissioner. Sec. 7491 applies to
court proceedings arising in connection with tax examinations
beginning after July 22, 1998. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(a), 112 Stat. 726. Petitioners timely filed their returns
for the years at issue. Hence, all of the returns were filed on
or before Apr. 15, 1998. The record does not disclose when the
examination of petitioners’ tax returns began, and it is possible
that the examination began before July 23, 1998. Petitioners do
not contend that sec. 7491 applies in these cases, and they have
not otherwise asserted that respondent has the burden of proof or
production with respect to any issue presented in these cases.
We therefore conclude that sec. 7491 does not apply, and
petitioners have the burden of proof and production.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011