Carl E. Jones and Elaine Y. Jones - Page 29

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            the loan account on January 1, 1990, before the addition of the                           
            amount at issue, was $483,144.                                                            
                  The record does not establish that petitioners' income was                          
            sufficient to cover all of their personal living expenses and                             
            also to permit them to accumulate sufficient assets to repay the                          
            transferred amount.  Rather, the ever-increasing reported loan                            
            balance is an indication that petitioners' annual income was not                          
            sufficient to allow them to maintain their lifestyle and repay                            
            their obligations.  Therefore, petitioners have not shown that                            
            there was a reasonable expectation that they could have repaid                            
            the loan from their annual income.                                                        
                  Notwithstanding petitioners' insufficient income as a source                        
            of repayment, a review of petitioners' tax returns for the years                          
            at issue indicates that they owned substantial rental property                            
            which could have been used to repay the amount at issue.  There                           
            is no indication in the record, however, that the corporation                             
            would or could have required petitioners to sell or mortgage                              
            those assets for that purpose.                                                            
                  On the record before us, petitioner has failed to establish                         
            that he reasonably believed that he would be able to repay the                            
            amount at issue on demand.                                                                
                  8.  Records of Assumption                                                           
                  The only records relating to the assumption at issue are the                        
            journal entries.                                                                          






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