Carl E. Jones and Elaine Y. Jones - Page 14

           indebtedness; $417,978 that Development owed to INI; and $61,057                           
           that it owed to Towergate.                                                                 
                 Respondent also disallowed a $54,369 credit recorded for                             
           petitioner's payment of Development's indebtedness that                                    
           petitioner did not substantiate8 and disallowed credits totaling                           
           $115,725 that were for petitioner's unverified deposits in the                             
           corporate account.                                                                         
                 Respondent determined that Development distributed $527,318                          
           to petitioner, and that he paid a total of $301,900 into the                               
           corporation.  Respondent applied the amounts paid to the                                   
           corporation first to the beginning loan balance, which according                           
           to respondent's calculations was $36,173, and the remainder as an                          
           offset to the current year withdrawals, for a net distribution of                          
                 Respondent determined that the distributions made to                                 
           petitioner in 1989 had exhausted Development's accumulated                                 
           earnings and profits and also consumed petitioner's stock basis.                           
           Thus, respondent adjusted petitioners' 1990 income for capital                             
           gains in the amount of the net distribution made by Development                            
           in 1990, $261,591.  Petitioner asserts, inter alia, that he                                
           assumed Development's indebtedness as represented in the loan                              
           account summary.                                                                           

                 At trial, petitioner introduced a copy of a check signed by                          
           Mrs. Jones made to Cobb Commercial Bank for $54,369.  Respondent                           
           concedes on brief that the amount of the check will be allowed as                          
           a credit for 1990.  See supra note 1.                                                      

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