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considered the repayments restitution for the losses Irvington
Federal incurred, not a loan. The line of credit format employed
by Mr. Ottey was solely for the bank's internal accounting use.
Further, the confessed judgments signed by petitioners do not
characterize the repayments as "debt" as in Buff, but only as
"advances" (namely, the overdrawn funds). Moreover, we are
cognizant of the fact that petitioner's plea agreement with the
U.S. Attorney's Office with respect to his cash structuring charge
required petitioner to make restitution to Irvington Federal.
Second, there is no evidence that petitioners would have
qualified for a loan from Irvington Federal. See Quinn v.
Commissioner, 62 T.C. 223, 229 (1974), affd. 524 F.2d 617 (7th Cir.
1975) (holding that no loan transaction occurred and embezzled
funds were includable in income where the savings and loan could
not make a loan to the taxpayer under State law). There is no
evidence that the bank conducted a check of petitioners' credit-
worthiness before the confessed judgments and mortgages were
executed. Additionally, there is no evidence of a continued
relationship between petitioners and Irvington Federal outside of
the restitution payments, whereas in Buff the taxpayer continued to
work for the employer for 1 month.
We do not believe petitioners' July 1988 execution of
confessed judgment notes and mortgages to cover the bank's losses
was intended by the parties to create a consensual loan between
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