Maurice D. and Elinor Taylor - Page 14

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             after the check-kiting scheme collapsed and the bank incurred                                        
                    For a transaction to be deemed a loan (and thus nontaxable),                                  
             the parties must have intended, at the time the transaction was                                      
             entered, that the money advanced be repaid.  Moore v. United                                         
             States, supra at 978; Commissioner v. Makransky, 321 F.2d 598, 600                                   
             (3d Cir. 1963), affg. 36 T.C. 446 (1961); Leaf v. Commissioner, 33                                   
             T.C. 1093, 1096 (1960), affd. 295 F.2d 503 (6th Cir. 1961); Kreimer                                  
             v. Commissioner, T.C. Memo. 1983-672.  The converse is also true:                                    
                          When a taxpayer acquires earnings, lawfully or                                          
                    unlawfully, without the consensual recognition, express                                       
                    or implied, of an obligation to repay and without                                             
                    restriction as to their disposition, "he has received                                         
                    income which he is required to return, even though it may                                     
                    still be claimed that he is not entitled to retain the                                        
                    money, and even though he may still be adjudged liable to                                     
                    restore its equivalent."                                                                      
             James v. United States, supra at 219 (quoting North Am. Oil Consol.                                  
             v. Burnet, 286 U.S. 417, 424 (1932)).                                                                
                    With respect to the case at hand, from the inception of                                       
             petitioner's check-kiting scheme in 1980 or 1981 through the day                                     
             the scheme collapsed in July 1988, Irvington Federal never                                           
             consented to petitioner's overdraws.  See Romer v. Commissioner,                                     
             supra. Indeed, Mr. Ottey, Irvington Federal's president, testified                                   
             that neither he nor the bank was aware of the check-kiting scheme                                    
             until petitioner notified them of it in July 1988.  And no evidence                                  
             was introduced to contradict this testimony.  Thus, it is clear                                      
             that no loan agreement was made between petitioner and Irvington                                     

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