funds held in APECO Equine's name was preconceived. Hallowell v.
Commissioner, supra at 608-609.
We also are not inclined to credit petitioners' assertion
that Fifth Third's refusal to renew APECO's loans during June
1990 was unexpected. APECO was sustaining losses and was having
difficulty developing the Planatronic prior to that time. Mr.
Kluener guaranteed its debt, but his financial condition was poor
during 1989 and 1990, due principally to the collapse of his real
estate ventures, which was one of the reasons that the decision
was made to sell the horses.
Mr. Kluener's need to make payments on his debts to Fifth
Third does not even explain why all funds held in APECO Equine's
name were distributed because, pursuant to the renegotiation of
his loans from Fifth Third, he was obligated to reduce the
principal amount of his debt by at most $1,500,000, and he
reduced it by only $1 million before it was again renegotiated.
In fact, Mr. Kluener lent $776,000 of the amount distributed back
to APECO.
Furthermore, it is difficult to justify Mr. Kluener's use of
the funds that had been held in APECO Equine's name to pay down
his loans to Fifth Third. As part of the renegotiation of the
loans, Fifth Third restricted Mr. Kluener's ability to withdraw
funds from his agency account for purposes other than the payment
of his or APECO's obligations to it. Moreover, the net
distributions that he received with respect to his APECO stock
were also to be applied to pay his obligations to Fifth Third.
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