Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 19

            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).                                                                      

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