- 34 -
We simply do not believe petitioners' paper trail of
promissory notes, deeds of trust, assignment agreements, and
assumption of liabilities agreements tells the whole story
because the funds that were loaned to Chestnut Grove and Group M
in 1987 and 1988 previously traveled a circuitous route, which
begins and ends with petitioner, in direct contradiction to
petitioners' assertion that Mr. Bell was the ultimate source of
those funds. In sum, we have considered all of the evidence
presented by petitioners, but, because the Yakima interest
payments were credited to the Aldergrove account on December 26,
1991, and, on that date, petitioner controlled Aldergrove
partnership matters and benefited from and controlled the funds
in the Aldergrove account, we are not persuaded that the Yakima
interest payments represent anything other than interest paid to
petitioner on account of loans made by petitioner.
D. Conclusion
We hold that the 1991 interest payments are taxable to
petitioners.
III. $25,000 Deposit
A. Introduction
In the notice of deficiency, respondent determined that
$317,160 was deposited in bank accounts held in the name of
petitioners during 1991 and that those deposits were unexplained.
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