Carl E. Jones and Elaine Y. Jones - Page 28

                                                -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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