Leslie R. Barth - Page 19

                                                - 19 -                                                  
            (2d Cir. 1969), affg. on this issue and revg. T.C. Memo. 1967-                              
            174; Grosshandler v. Commissioner, supra at 19-20.                                          
                  Petitioner's asserted during his testimony that he relied on                          
            Lipton, Onofrio, and Timbie to prepare his tax returns.  With                               
            respect to the purported loans, he testified:                                               

                  a significant portion of the proceeds that I received                                 
                  from the Bergman & Barth firm, which, in the aggregate,                               
                  deferred compensation and capital gains, et cetera,                                   
                  aggregated close to $400,000, to the best of my                                       
                  knowledge, was rerouted, in other words, through the PC                               
                  and other entities.                                                                   
                        In other words, loans were made by myself                                       
                  individually to the PC and to the other related                                       
                  entities from the proceeds that I realized on the                                     
                  Bergman & Barth sale.  So that obviously if one were                                  
                  dealing with just the checks that were written to me,                                 
                  number one, they don't reflect rather significant                                     
                  loans, which I believe at least a significant part of                                 
                  the interest has been checked and allowed by the IRS.                                 
                        And, also, as I say, it doesn't reflect the good                                
                  part of the $400,000 that got rerouted, in other words,                               
                  through those accounts.  So it was those analysis, in                                 
                  other words, that I went through with Mr. Timbie and                                  
                  with Mr. Onofrio, in other words, to present the                                      
                  clearest picture.  And the main point of focus that                                   
                  Mr. Timbie had with respect to the loans and I think                                  
                  which lead to the statements being attached to the                                    
                  returns was the issue in subsequent years, years                                      
                  subsequent to 1980.                                                                   
                        What happened was--let me take that back.  What                                 
                  happened is in the early years, there was a credit                                    
                  balance running from the entities to me.  In other                                    
                  words, I lent them more money than they lent me and                                   
                  they were repaying it.  There was a time when it ran                                  
                  the other way, in other words, where I owed them and                                  
                  the matter ultimately was repaid in years subsequent to                               
                  1980.  The repayment years were primarily, I believe,                                 
                  1984 and 1985.                                                                        

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