realized was $1,235,595. The gain was reported on APECO's return for the taxable year ending June 30, 1990, but, after application of its NOL's, no taxable income or tax resulted from the sales. The sales proceeds were initially deposited in a checking account with Fifth Third, and were later transferred to a brokerage account with Legg Mason. Only Mr. Kluener and his assistant had signature authority for the checking account, and only Mr. Kluener could authorize transactions on the account with Legg Mason. Mr. Kluener made every effort to keep secret from APECO's other directors6 and officers (1) the transfer of the horses to APECO, (2) the sale of the horses in its name, (3) the receipt of the sales proceeds by APECO Equine, and (4) the existence of the accounts containing those proceeds. During the time when the sales proceeds were held in the name of APECO Equine, Mr. Kluener continued to lend money to APECO to fund its operations so as to preserve the secret. None of the sales proceeds were paid to APECO by APECO Equine. Having dismissed the other directors of APECO, Mr. Kluener, as sole director of APECO, declared a distribution to himself of $2,176,000, representing the balance of the account with Legg Mason in APECO Equine's name, that was effective as of June 25, 1990, and was to be paid by July 31, 6 Respondent contends that APECO's Board did not vote on whether to (1) accept the transfer of the horses or (2) to sell or retain them. Petitioners respond by claiming that there is no evidence in the record showing whether or not the board voted on those matters. We note that petitioners bear the burden of proof, and the absence of evidence on this score can hardly be considered to operate in their favor. Hallowell v. Commissioner, 56 T.C. 600, 608 (1971).Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
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