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In 1976, petitioner's share of the oil partnership, as
listed on his Schedule K-1, lost $7,324. That year interest
accrued on the $20,000 bank loan of $637 and petitioner paid
$363. On the $18,353 bank loan, $386 of interest accrued and
petitioner paid $344.
In 1977, during an audit of petitioner's 1974, 1975, and
1976 returns, petitioner told Internal Revenue Service (IRS)
Agent Terry McGehee (Agent McGehee) that the oil well was dry and
that he thought he was going to lose his whole investment.
In 1978, petitioner's share of the oil partnership, as
listed on his K-1, earned only $1,009. That year interest
accrued on the $20,000 bank loan of $1,742 and on the $18,353
bank loan of $1,553.
From 1976 through 1978, petitioner had difficulty repaying
the bank loans because the income from the oil wells, $100 to
$200 a month, was insufficient to service petitioner's debts. In
1977 and 1978, the checks did not even cover interest, and as a
result petitioner's bank debt grew.
Jack Ham7
In the 1970's, Jack Ham was in the construction business.
He became acquainted with petitioner through his construction
work and was a major contributor to petitioner's gubernatorial
7 Jack Ham died before trial.
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