Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 30

            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  Next

Last modified: May 25, 2011