- 6 -
their characterization of the advances. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). If petitioners meet their burden
of proof, then the advances are not includable in their income.
See Falkoff v. Commissioner, 62 T.C. 200, 206 (1974); Arlen v.
Commissioner, 48 T.C. 640, 648 (1967). For 1988 only, respondent
bears the burden of proving the advances constitute taxable income
inasmuch as that is a new matter, first raised in respondent's
amended answer. Rule 142(a).
Whether the advances should be characterized as loans or
payments for services is a factual determination. Beaver v.
Commissioner, 55 T.C. 85 (1970); Haber v. Commissioner, 52 T.C. 255
(1969), affd. 422 F.2d 198 (5th Cir. 1970). For a payment to
constitute a loan, at the time the funds are transferred, the
recipient must intend to repay the advance, and the transferor must
intend to enforce repayment. Haag v. Commissioner, 88 T.C. 604,
615-616 (1987), affd. without published opinion 855 F.2d 855 (8th
Cir. 1988). Further, the obligation to repay must be unconditional
and not contingent upon a future event. United States v.
Henderson, 375 F.2d 36, 39-40 (5th Cir. 1967); Bouchard v.
Commissioner, 229 F.2d 703 (7th Cir. 1956), affg. T.C. Memo. 1954-
243. An intent to repay a purported loan by the performance of
services in the future does not result in the exclusion of the
underlying funds from the recipient's income. Beaver v.
Commissioner, supra at 91. In such a case, the purported loan
proceeds are nothing more than an advance salary or other payment
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