- 10 -
petitioner was still indebted to Mr. Zurn, neither could give a
definite current balance of the debt. Furthermore, during the
time that petitioner was allegedly borrowing approximately
$700,000 from Mr. Zurn to keep his businesses going, he also
allegedly gave approximately $300,000 to the church and/or
charities. While allegedly all of the funds lent in 1986 were
used for the Montrose property, $47,000 from the account to which
the alleged loans from Mr. Zurn were deposited was sent to the
church. This was at a time when at least Mr. Zurn was under the
impression that "Things were kind of tough [for petitioner]."
Moreover, there is the matter of the "Community Land & Oil
Corporation Trust Lot 2160" transaction (Lot 2160 transaction) in
1989. While the facts surrounding the Lot 2160 transaction are
unclear, during 1989 Mr. Zurn issued a check in the amount of
$258,351 to the "Fountain Exchange", which went into an account
that petitioner controlled to purchase Lot 2160, a parcel of real
estate that petitioner owned. Later Mr. Zurn allegedly
determined that Lot 2160 was not worth the money that he had
paid. It is unclear exactly what happened next, but it is clear
that petitioner never returned the $258,000.8 It is also strange
that, notwithstanding Mr. Zurn's view that petitioner had sold
him a worthless lot for $258,000, according to their testimonies,
8 The Lot 2160 transaction has been before the Court before
in Zurn v. Commissioner, T.C. Memo. 1996-386. In that case we
determined, partly on the basis of this transaction, that Mr.
Zurn had committed tax fraud.
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