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the $30,000 loan and the $3,000 loan is neither incredible nor
controverted. Petitioners' net worth for 1990 and 1991 must be
adjusted to reflect these increased liabilities.
Petitioner also testified that he borrowed $40,000, in
addition to the $80,000 allowed by respondent, from Gilpin. He
testified that he did not sign a promissory note for either the
$80,000 loan or the $40,000 loan from Gilpin. Gilpin was not
called to testify at trial. The evidence presented regarding the
$40,000 loan is sparse, ambiguous, and consists only of:
canceled checks reflecting $109,320 in 1991 in payments to
Gilpin; a letter stating that the checks represent the repayment
of the $80,000 loan with interest; and a copy of a receipt from a
title company indicating a $40,000 deposit from Gilpin to an
account for the purchase of 515 Stanton Street.
Petitioners present two alternative arguments regarding the
alleged $40,000 loan from Gilpin. First, petitioners argue that
their liabilities should be increased by $40,000 as of
December 31, 1989, and reduced as of December 31, 1990, by
documented payments. In the alternative, if the $40,000 is not
recognized as a liability, petitioners ask that the excess over
$80,000 that petitioners paid to Gilpin be treated as an interest
deduction in 1991. In any event, petitioners argue that the
excess payments were not personal living expenses as determined
by respondent.
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