J.J. Zand - Page 109

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          endorsed to I.D.S. does not appear on the 1975 CTC cash receipts            
          journal.                                                                    
               In 1976 petitioner wrote four checks to himself on the                 
          Diesel Power Bank of America account in the total amount of                 
          $265,000.  Three of these checks in the total amount of $150,000            
          were endorsed for deposit to CTC or Zand personal accounts.  The            
          1976 CTC receipts journal reflects these payments as a transfer             
          or loans from Diesel Power.  There is no other documentary                  
          evidence of loans in the record.  The fourth check in the amount            
          of $115,000 was endorsed to Ray Prussing.  Although there is no             
          documentary evidence of a loan at the time the check was                    
          endorsed, Ray Prussing paid $115,000 to petitioner in 1977.  The            
          1977 CTC cash receipts journal lists a deposit of $115,000 as a             
          Refund/Reimbursement.                                                       
                            F. Sale of Diesel Power Stock                             
               In December 1977 petitioner sold the remainder of his Diesel           
          Power stock to Mr. and Mrs. Khalatbari for $6 million, $3,300,000           
          of which was paid as a downpayment to petitioner at that time.              
          The Shareholder Consent and Agreement to the sale states that,              
          prior to the sale, petitioner owned 40 percent of Diesel Power              
          stock, and that the Khalatbari family owned the remaining 60                
          percent.  On petitioner's 1977 income tax return, petitioner                
          reported the sale of a 40-percent stock interest in Diesel Power.           
          Sometime after the sale of petitioner's Diesel Power stock in               





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