Bill L. and Patricia M. Spencer - Page 30

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          transactions (i.e., executing documentation to reflect the resale           
          of the assets to SPC-SC and SPC-FL, arranging for the S                     
          corporations to pay them so that they could in turn pay SSI, and            
          separately reporting items for income tax purposes at the                   
          corporate and individual level).  They argue that the result                
          would have been a wash and the entries would have offset each               
          other.  Furthermore, petitioners contend that, although no                  
          conveyancing documents were prepared to reflect the resale of the           
          assets to SPC-SC and SPC-FL, the transactions were evidenced by             
          journal entries on the books of the S corporations.24                       
          Petitioners argue that none of the deficiencies of which                    
          respondent complains negates the form of these transactions,                
          which has been stipulated.                                                  
               Petitioners rely on Old Colony Trust Co. v. Commissioner,              
          279 U.S. 716 (1929), for the proposition that payments made on              
          behalf of or at the direction of a creditor to a third party are            
          the same as payments to the creditor and repayment over by the              
          creditor to the third party.  In the same vein, petitioners                 
          contend that they reported no interest income and claimed no                
          interest expense for amounts allegedly paid on their behalf by              
          the S corporations to SSI and SCNB because such income and                  

          24   SPC-SC and SPC-FL each recorded the transaction as a debit             
          to assets and a credit to notes payable--seller.                            

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