Bobby E. Welch - Page 9

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          construct the improvements.5  But that is contradicted by                   
          petitioner's alleged journal on the Montrose property showing               
          that moneys were not spent in any amounts until after August 1,             
          1985.6  We are faced, therefore, with inconsistencies not only in           
          petitioner's testimony but also between his testimony and the               
          documents.                                                                  
               These are not the only weaknesses in the alleged Welch/Zurn            
          financial relationship.  There are no indicia of a normal                   
          debtor/creditor relationship supporting petitioner's version of             
          the facts.  There were no notes, no due dates or payment                    
          schedules, and no stated rate of interest.7  Indeed, at the                 
          trial, while both petitioner and Mr. Zurn testified that                    


               5  We have tried in vain to correlate the checks from Mr.              
          Zurn that were deposited in the Montrose property account with              
          the expenditures listed on the alleged journal on the Montrose              
          property.                                                                   
               6  Respondent objects to Exhibit 44AR, which was offered as            
          a record of Mr. Zurn's advances to the Montrose property.  The              
          only reference that may be to Mr. Zurn is an ambiguous notation             
          on page 2 of Exhibit 44AR that reads "$202.31 - 18 Dec. - 15 shts           
          3/4 CDX Grossman's - pd by Stan Zurn".  We do not accept that               
          this was a contemporaneous record of funds allegedly borrowed by            
          petitioner.  We do admit the exhibit as a record created by                 
          petitioner, but we have little confidence in the document as                
          being a record of loans from Mr. Zurn to petitioner.                        
               7  Petitioner argues that the interest rate at the beginning           
          was 6 percent and then was changed to 17.136 percent, as                    
          evidenced by a notation on the alleged journal on the Montrose              
          property.  The reference in the journal reads "Feb. 21, 85 to               
          B.W. 17.136%."  Whatever this may refer to, we do not believe               
          that it relates to the interest that petitioner was expected to             
          pay.  We note further that petitioner did not claim any deduction           
          for interest on his 1986 tax return.                                        




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