-28-
interest.18 Nor is there any evidence that interest was paid or
accrued on the indebtedness at issue.
3. Security or Collateral for the Transfers
There is no evidence that petitioner provided, or was even
requested to provide, any security or collateral for the loans.
4. Fixed Maturity Date for Repayment
There was no fixed date for repayment of the assumed debt.
5. Demand for Repayment
Although INI's records show that petitioner's indebtedness
to INI was substantial,19 and that INI reported losses and no
gross receipts or sales on its returns filed for 1990 and 1991,
it apparently made no demand on its largest debtor for payment.
6. Actual Repayments
Petitioner offered no evidence, e.g., canceled checks, bank
statements, etc., of actual repayment.
7. Ability to Repay
Petitioners reported adjusted gross income of $93,164 and
$15,010 in 1990 and 1991, respectively, and negative taxable
income in both years. Petitioner reported that the balance of
18 The journal entries merely state that the entries "Reclassify
amount due from Carl E. Jones Development at 5-31-90 per W/P 143"
and "Reclassify the remaining amount due from Carl E. Jones
Development at 9-30-90".
19 In 1989, petitioner's indebtedness to INI was reported on
Schedule L of INI's return (Form 1120) as $928,420; in 1990 as
$981,202; and in 1991 as $954,026. The loan account was,
therefore, 94.06 percent, 99.99 percent, and 97.57 percent of
INI's total assets in 1989, 1990, and 1991, respectively.
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