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Activewear to Jackson. Petitioner also contends that the
security interests are not taxable to him because he received no
benefit from them in the years in issue. For reasons discussed
next, we agree with petitioner.
B. Whether Petitioner Misappropriated Funds From Activewear
Respondent contends that petitioner misappropriated the
funds Activewear lent to Jackson and his corporations. We
disagree. When he filed his lawsuit, Waddell thought that
petitioner had embezzled money from Activewear. However, after
he investigated the matter, he believed that petitioner did not
benefit from the loans to Jackson. Petitioner had no reason to
believe that Waddell would not approve the advances because
Waddell had approved the first one, and he did nothing to conceal
the loan records from Waddell. Petitioner credibly testified
that he received no benefit from Activewear's loans to Jackson.
Petitioner was not criminally charged for his conduct related to
Activewear. We do not believe that he misappropriated any funds
from Activewear.
Respondent contends that the transfers of funds from
Activewear to Jackson's corporations were not loans because there
were no written agreements and Jackson provided no collateral or
other security. We disagree. Respondent concedes that the first
$50,000 check was a loan even though it was based on an oral
agreement. The later transfers were also loans based on oral
agreements.
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