Douglas Bynum, Jr. and Shirley A. Bynum - Page 5




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          SEI.  First, there was no valid and enforceable obligation to pay           
          a fixed or determinable amount of money.  Second, there was no              
          oral or written agreement establishing a debtor-creditor                    
          relationship.  Third, Mr. Bynum did not demand or receive any               
          payments from SEI relating to the alleged loans.  Finally, the              
          expenditures were not structured as, or intended to be, loans.              
          To keep his business afloat, Mr. Bynum routinely paid a myriad of           
          typical business expenses.  He was concerned about the survival             
          of the business, not repayment for the expenses.  In sum, Mr.               
          Bynum’s payments were contributions to capital, and not bona fide           
          indebtedness.  Even if the expenditures were bona fide loans,               
          petitioners would not be entitled to section 166 bad debt                   
          deductions.  SEI was dissolved in 1995.  Petitioners claimed                
          deductions for the alleged bad debts in 2000 and 2001, yet there            
          is no evidence that the alleged loans became worthless in those             
          years.  Accordingly, we sustain respondent’s determination.                 
               We must also determine whether petitioners are liable for              
          the section 6651(a)(1) additions to tax.  Section 6651(a)(1)                
          provides that a taxpayer shall be subject to an addition to tax             
          for failure to file a timely return, unless it is shown that such           
          failure was due to reasonable cause and not willful neglect.                
          Respondent bears, and has met, the burden of production relating            
          to the section 6651(a)(1) additions to tax and has established              








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