Wayne L. Patrick - Page 12

                                       - 12 -                                         

          existence of notes in this case is not strong evidence of the               
          character of the transactions because the notes were not signed             
          on or around the time of the distributions.  Petitioners argue              
          that the presence of the notes is strong evidence of debt.                  
               Brian testified that the notes were not prepared or signed             
          contemporaneously with the receipt of funds.  He was unsure of              
          when he had signed the notes but believed it to be in either 1992           
          or 1993.  Brian further stated that he signed the notes "at least           
          a year" after the receipt of the funds.  Wayne did not know                 
          exactly when he had signed the notes.  Given this testimony and             
          other evidence in the record, the mere presence of notes is                 
          assigned little weight unless supported by some other objective             
          evidence showing the distributions to be loans, especially                  
          considering petitioners' relationship to Erie Industries and                
          Wayne's position as Plan trustee.  Additionally, Brian's failure            
          to sign three of his notes and Wayne's failure to sign one of his           
          notes weakens petitioners' position that the notes are strong               
          evidence of debt.  Under these circumstances, "form does not                
          necessarily correspond to the intrinsic economic nature of the              
          transaction".  Fin Hay Realty Co. v. United States, 398 F.2d 694,           
          697 (3d Cir. 1968).  This indicium offers no more than marginal             
          support for the existence of debt.                                          
               b.  Provisions for Security, Interest Payments, and a Fixed            
               Repayment Date                                                         






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next

Last modified: May 25, 2011