David A. Demetree - Page 2

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          administrative costs pursuant to section 74301 and Rule 231.  On            
          November 24, 2003, this Court issued its memorandum opinion in              
          Demetree v. Commissioner, T.C. Memo. 2003-323.  We incorporate              
          herein the facts set forth in that opinion.                                 
               From 1983 through 1991, David’s parents, Arthur and Naomi,             
          regularly gave petitioners and their children gifts including               
          food, property, and money (e.g., groceries, two homes, $900,000             
          in trust for David’s children, etc.).  David’s parents and his              
          sister, Ms. Hinkle, also made substantial loans, documented by              
          promissory notes, to David.  When David failed to repay the                 
          loans, his parents and sister obtained judgments against him.               
               From the early 1970s through his death in 1991, Arthur                 
          operated Demetree and Associates, a commercial property                     
          management sole proprietorship.  From 1983 to 1991, David                   
          occasionally performed services for Demetree and Associates and             
          David signed Arthur’s name on Demetree and Associates’ business             
          deposit slips and checks (e.g., checks payable to himself or to             
          third parties).  Arthur did not deduct the amounts he transferred           
          to David; issue David Forms W-2, Wage and Tax Statements; or                
          issue Forms 1099-MISC, Miscellaneous Income.                                

               1  Unless otherwise indicated, all section references are to           
          the Internal Revenue Code of 1986, as amended, and all Rule                 
          references are to the Tax Court Rules of Practice and Procedure.            

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