-29- 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.Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Next
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