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McZand Corporation's 1977 financial statement shows that
while the corporation's equity was less than $30,000, its debt
exceeded $725,000. The corporation's December 1978 financial
statement shows that while McZand Corporation's equity was less
than $85,000, its debt exceeded $3 million.
On December 26, 1979, McZand Corporation executed deeds
transferring the Stoneridge, Westgrove, and Pickerington tracts
from McZand's name to petitioner. On the same date petitioner
signed deeds transferring the property to Kenyon College. There
are no documents of record to indicate that petitioner assumed
the mortgage indebtedness on the real estate transferred from
McZand Corporation to petitioner and from petitioner to Kenyon
College.
In computing its taxable income for 1979, McZand Corporation
failed to take into account any realized gain upon the
disposition of one of the three parcels of property transferred
from McZand to petitioner.
According to the McZand Corporation's trial balance
workpapers, the transfer of the properties to petitioner was in
full payment of the note due him. However, at the same time,
petitioner allegedly purchased McZand Corporation's note to
McCabe at less than fair market value.
In March 1980 petitioner transferred his 100-percent
ownership in McZand Corporation to Caspian Florida, a subsidiary
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