Richard R. Hamlett - Page 8

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               Petitioner did not recognize in 1996 an existing and fixed             
          obligation to repay the $100,000; he did not make in 1996                   
          provisions to repay the $100,000.                                           
               Parker did not make a gift of the $100,000 to petitioner.              
               Respondent contends that petitioner was required to include            
          in gross income for 1996 the $100,000 that petitioner received              
          from the sale of the Corporations, and that this inclusion is               
          required by the claim of right doctrine.                                    
               Petitioner maintains that the $100,000 that he received as             
          consideration for transferring his stock in the corporations to             
          Parker is not includable in gross income because his receipt of             
          the money did not satisfy the elements of the claim of right                
          doctrine.  Specifically, petitioner contends that he did not                
          receive the money under a claim of right, and there was a                   
          restriction on his economic use of the money.  Petitioner                   
          contends in the alternative that the $100,000 was a gift and thus           
          is excludable from gross income under section 102(a).                       
               Respondent replies that petitioner’s 1996 fraudulent                   
          purpose, which led to the bankruptcy court’s voiding of the 1996            

               7  Sec. 7491, which shifts the burden of proof to the                  
          Commissioner if the taxpayer meets certain conditions, does not             
          apply in the instant case because the parties stipulated that the           
          examination of petitioner’s tax returns began before July 22,               
          1998, the effective date of sec. 7491.  Internal Revenue Service            
          Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.                 
          3001(a), 112 Stat. 726.                                                     

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