Ramiro and Maria Martinez - Page 10

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          petitioners failed to carry their burden of proof, that Mr.                 
          Martinez received the amounts reported on the Forms 1099 by Life            
          Bank, Geylikman, Alpa, and Svetella under a claim of right, and             
          that Mr. Martinez must include those amounts in his income.  See            
          Liddy v. Commissioner, T.C. Memo. 1985-107 (taxpayer did not meet           
          his burden of proof where he inadequately explained what he did             
          with the funds he received), affd. 808 F.2d 312 (4th Cir. 1986).            
          However, we shall allow Mr. Martinez a deduction of $1,000 for              
          the amount that Mr. Ortiz testified under oath he received from             
          Mr. Martinez.                                                               
          B.   Mrs. Martinez                                                          
               Mrs. Martinez testified that she spent the $3,150 she                  
          received from the County on her grandchildren because she                   
          believed the money belonged to them and that the County only paid           
          it to her “because she was taking care of the kids.”  Mrs.                  
          Martinez failed to provide any credible evidence, however, to               
          support her claim that the money belonged to her grandchildren.             
          For example, Mrs. Martinez presented no evidence that her use of            
          the County funds was restricted, that she spent the money on her            
          grandchildren other than by choice, or that the funds were                  
          excludable from her income by operation of law.5  Consequently,             

               5For example, sec. 131(a) provides that gross income shall             
          not include amounts received by a foster care provider as                   
          qualified foster care payments.  See Cato v. Commissioner, 99               
          T.C. 633 (1992).  Petitioners do not contend that Mrs. Martinez             

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