The funds held in APECO Equine's name were not so restricted. We
are hard pressed to understand the business reason for the use of
those funds to reduce Mr. Kluener's indebtedness instead of funds
that generally could be used only for the purpose of loan
repayment. Moreover, Mr. Kluener subsequently used funds from
his agency account to finance APECO.11 That Mr. Kluener would
use funds ostensibly earmarked for financing APECO's operations
to pay down his own indebtedness and then finance APECO using
funds that were to be used to pay down that indebtedness
indicates to us that, as respondent puts it, he viewed the
accounts in which those funds were held "as merely different
sections of his personal wallet."
Petitioners have also presented varying reasons for the
distribution of the sales proceeds. Mr. Hathaway, on whose
testimony petitioners rely to establish the reason for the
distribution, has previously offered another explanation for the
distribution. In an affidavit made in connection with the
instant case, Mr. Hathaway states that the distribution was made
to Mr. Kluener in an effort to control the sales proceeds because
of the "attitude of management" that sought to use them for other
projects, an attitude "had not been foreseen or expected", rather
11 Petitioners contend that the record does not show the source
of the funds Mr. Kluener used to make loans to APECO. However,
because petitioners bear the burden of proof, the absence of
evidence on the matter can hardly operate in their favor.
Hallowell v. Commissioner, 56 T.C. at 608. Moreover, the records
of Mr. Kluener's accounts with Fifth Third are sufficiently
detailed to show that the agency account was the source of at
least a portion of the funds lent to APECO.
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011