Donald R. Martin - Page 16

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                    defend against respondent's determination in the notice of                                                                                             
                    deficiency that the unpaid balances in 1990 and 1991 were                                                                                              
                    misappropriations and income to petitioner.  Respondent bears the                                                                                      
                    burden of proof.  Rule 142(a).                                                                                                                         
                              The four security interests were not collateral for the                                                                                      
                    Activewear loans to Jackson and his corporations; they secured                                                                                         
                    petitioner's consolidated $80,000 personal loan, $65,000 of which                                                                                      
                    petitioner used to provide operating capital for Activewear.                                                                                           
                    Thus, petitioner used the loan proceeds primarily for Activewear.                                                                                      
                    Petitioner used about $27,000 of his marketable securities and a                                                                                       
                    house with about $100,000 in equity as collateral for the                                                                                              
                    consolidated loan.  This is more than enough collateral for the                                                                                        
                    $15,000 loan that petitioner used for inventory for his                                                                                                
                    convenience store that was part of the $80,000 consolidated loan.                                                                                      
                              Respondent points out that petitioner benefited from living                                                                                  
                    in the O'Key house for 1 year rent-free.  That year was August                                                                                         
                    1993 to August 1994.  The years in issue are 1990 and 1991.                                                                                            
                    Respondent has not shown how living in the house in 1993 and 1994                                                                                      
                    had value in the years in issue.  Also, respondent did not prove                                                                                       
                    the value of the benefit petitioner received.                                                                                                          
                              We conclude that respondent has not shown that petitioner                                                                                    
                    received any income from security interests in 1990 or 1991.                                                                                           








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