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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