- 14 -
Respondent has failed to show, by a preponderance of the
evidence, that Mr. Solaas' promise when given had insufficient
value to support the transfer.5 See Pierce v. Commissioner,
supra at 435. Therefore, we hold that the loans KBI made to Mr.
Solaas were not constructive fraud on KBI's creditors.
KBI's Alleged Forgiveness of the Loans
Respondent argues that "if the alleged loans are treated by
the Court as real loans" from KBI to Mr. Solaas, then the
forgiveness of those loans and/or the decision not to collect on
those loans is a transfer, citing Merriam v. Commissioner, T.C.
Memo. 1995-432, affd. without published opinion 107 F.3d 877 (9th
Cir. 1997). Respondent contends that this transfer occurred when
KBI was insolvent and would constitute constructive fraud.
Respondent bears the burden of proof. Sec. 6902(a); Rule
142(d). Respondent did not point to any evidence that KBI
forgave or decided not to collect the loans. Furthermore,
respondent has not submitted any evidence that KBI did not
receive reasonably equivalent value in exchange for this alleged
transfer. Respondent has failed to meet the burden of proof.
4 (...continued)
evidence that KBI charged Mr. Solaas interest.
5 We note that although Mr. Solaas was present at the trial
he did not testify, and respondent, who had the burden of proof,
did not call Mr. Solaas as a witness.
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