John F. and Tracy L. Barford, et al. - Page 9

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               In these circumstances, we believe that respondent's                   
          position that the loans fall within the ambit of section 482 had            
          a reasonable basis in law and fact, especially given the nature             
          of the relationship of the companies and the subsequent                     
          forgiveness of interest.                                                    
               Petitioners argue the loans were not bona fide                         
          indebtedness, but were mere transfers between the companies, and            
          that the notes were simply used to keep track of what was being             
          transferred between these companies.  Petitioners further argue             
          that because the transfers were not bona fide indebtedness,                 
          section 482 was inapplicable.  In support of their argument,                
          petitioners point out that there were no maturity dates on the              
          notes and no repayment schedule.                                            
               Regardless of whether respondent was correct in classifying            
          the loans as bona fide indebtedness, we believe respondent was              
          substantially justified in so doing.  The record indicates that             
          for several years, petitioners made payments on the notes, and              
          kept a schedule of these payments.  When petitioners assigned               
          the notes, they took great care to do it formally by documenting            
          the notices to the debtors.  Moreover, petitioners treated the              
          loan from Marco Oil to RAM Drilling as a "Notes Payable"                    
          liability when they valued RAM Drilling for purposes of their               
          liquidating distribution from TMC Resources in 1983.                        






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