-40-
petitioner. INI added the balance of the transferred account,
$128,429, to the account it maintained to record the amounts INI
lent to petitioner for its year ended September 30, 1988.
According to the loan summary prepared by Morrisett, the
loan account balance had ballooned to $980,527 on December 31,
1991. The increase was due largely to petitioner's alleged
assumption of his other corporations' indebtedness to INI,
capitalized interest, and INI's distributions of property to
petitioner that were recorded as loans.
For instance, in 1990 when Carlsgate and Development were
going out of business while indebted to INI for $11,374 and
$417,978, respectively, petitioner allegedly assumed Carlsgate's
and Development's indebtedness.23 These alleged assumptions were
recorded on the books of INI as increases to the account it
maintained to record loans made to its shareholder. Petitioner
did not employ any of the traditional indicia of debt to
memorialize the assumptions; the only evidence of the assumptions
consists of his testimony and the loan account summary prepared
by Morrisett from the journal entries which were made by
Lavantucksin at the direction of petitioner.
In November 1990, Mrs. Jones purchased a townhouse (Westfair
No. 6) from INI. The balance due on the townhouse, $34,987, was
recorded as an increase to petitioner's loan account in 1991.
INI also distributed a one-half interest in a lot on Spalding
23 See supra Issue 1.
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