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a. $4,750 Check Drawn on The S&J Account
The $4,750 check written on the S&J account that Mrs. Reaves
endorsed and cashed is not a constructive dividend because she
used it to pay Lee for corn.
Respondent contends that, if $4,750 was the price after
allowing a 10-percent discount, then the undiscounted selling
price for the corn would have been $5,277.77. Respondent assumes
that Mr. Reaves and Lee would have calculated a discount equal to
exactly 10 percent and argues that the price of a load of corn
would be more in round numbers. Respondent's point is purely
speculative and is an insufficient basis for us to disregard the
testimony on this point.
Respondent points out that petitioners did not call Lee to
testify and contends that we should infer that his testimony
would have been adverse to petitioners. Apparently either party
could have called Lee to testify. We decline to apply an adverse
inference against petitioners here. See Gaw v. Commissioner,
T.C. Memo. 1995-531.
b. Checks for $11,730 Drawn on the George K. Reaves
Account and $23,800 Drawn on the S&J Account
Respondent contends that the proceeds of the $11,730 check
drawn on the George K. Reaves account with the notation "1966
Rogers Trailer" and the $23,800 check drawn on the S&J account
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