Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 22

            APECO, Mr. Kluener was not obligated to use the method of doing                               
            so that would incur the most tax and that it was appropriate to                               
            use APECO's NOL's to shelter the gain realized on the sales of                                
            the horses so that the full amount of the sales proceeds would be                             
            available for APECO's purposes.                                                               
                  We have considered petitioners' arguments; however, after                               
            considering all of the circumstances of the instant case, we                                  
            conclude that petitioners have not established that there was a                               
            legitimate business purpose, in addition to the admitted tax                                  
            avoidance purpose, for the transfer of the horses to APECO.  At                               
            the time that the horses were transferred, the development of the                             
            Planatronic was just beginning, and the project did not yet have                              
            a name.  Although the concept of a "turbo airless sprayer" was                                
            described at a meeting of APECO's board on June 8, 1989, there is                             
            no mention of such a product in the minutes of subsequent board                               
            meetings on November 20, 1989, and January 16, 1990.  During mid-                             
            1989, APECO's personnel had not allocated a specific amount of                                
            money to the development of the Planatronic.  Furthermore, APECO                              
            had received a $1,500,000 loan from Fifth Third at approximately                              
            the same time as the transfer occurred.  Moreover, it was Mr.                                 
            Kluener's practice at all relevant times to finance APECO's                                   
            operations with loans, rather than capital contributions.  Mr.                                
            Hathaway, Mr. Kluener's adviser, testified that Mr. Kluener                                   
            preferred to finance APECO in that manner.                                                    
                  Even after the sales proceeds were received, they were not                              
            used for any purpose of APECO during the time when they were held                             

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