-11- OPINION A. Contentions of the Parties Petitioner individually, and as a 99.5-percent partner of OMCC, contends that either OMCC or petitioner may deduct the $625,000 settlement payment and the $83,202 in legal fees associated with the farm loan litigation because those amounts were paid to protect OMCC’s ongoing business operations and its reputation.3 Respondent asserts that OMCC may not deduct the $625,000 settlement because, according to respondent, petitioner, not OMCC, made the settlement payment.4 Alternatively, respondent contends that neither OMCC nor petitioner may deduct the settlement payment or the legal fees in dispute because those payments were capital expenditures made to defend or perfect petitioner’s title to property. Sec. 1.263(a)-2(c), Income Tax Regs. 3 Petitioner argues that the burden of proof in this case should be shifted to respondent under sec. 7491(a). On the basis of the stipulation of facts and the evidence presented at trial, we decide this case according to the preponderance of evidence without regard to the burden of proof. 4 Respondent contends petitioner may not argue that she (instead of the partnership) may deduct the settlement payment because that would be a new theory raised for the first time after trial. We disagree. Petitioner raised the matter in her petition, which gave respondent fair notice. See Rule 31(a). Respondent is not prejudiced because whether petitioner may currently deduct or must capitalize the settlement payment does not require the presentation of any new or different evidence.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011