- 30 -
certainty that HEH ever reported the $113,354.31 More
fundamentally, even if HEH had reported the income, that would not
affect our conclusion that the income was from the Mercury Solar
business and properly reportable by Sparkman.
IV. Sparkman’s Entitlement to Claimed HEH Losses
For each year at issue, Sparkman offset (in whole or part)
his reported Mercury Solar PTO income with claimed losses from
HEH. The claimed HEH losses result largely from claimed
depreciation deductions. Respondent contends that Sparkman has
not substantiated his entitlement to these claimed losses.32 We
agree.
The only evidence introduced at trial in support of the
claimed HEH losses consists of self-serving figures listed in the
31 No entry on the purported 1999 HEH Federal income tax
return appears to correspond to the $113,354 of disputed HECO
rebate payments. If we believed that the $113,354 of HECO
payments flowed through HEH to Sparkman, and that he had
consequently reported it on his own 1999 Federal income tax
return, we might be sympathetic to an argument that Sparkman
should not be taxed twice on the same income. Petitioners have
not raised this argument, however, and the record does not
establish that Sparkman reported any of the $113,354 on his own
return.
32 Alternatively, respondent argues that the transactions
between HEH and its customers, whereby HEH purportedly sold solar
energy to its customers while retaining title to the solar water
heating equipment installed at the customers’ properties, were in
substance sales by HEH of the equipment; consequently, respondent
argues, HEH had no depreciable basis in the solar water heating
equipment. Because we resolve this issue in respondent’s favor
on the ground that petitioner has failed to substantiate the
claimed HEH losses, we need not and do not address respondent’s
alternative argument.
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