- 11 -
Mr. Zurn continued to advance petitioner money without any
security or, indeed, any notes of the debt.
Finally, we are troubled by Mr. Zurn's lack of specificity
as to the sources of the funds allegedly lent to petitioner.9 In
Zurn v. Commissioner, T.C. Memo. 1996-386, we found that during
1986 and 1987 Mr. Zurn had advanced $677,652 to an entity known
as Cities Development Group, Inc. (Cities). If petitioner's
version that the 1986 deposits in the amount of $375,000 came
from Mr. Zurn is to be believed, then Mr. Zurn lent over $1
million during this time. Mr. Zurn's Federal income tax returns
during this period clearly do not reveal the sources of the funds
that gave rise to this benevolent lending. We recognize that Mr.
Zurn owned various rental properties that could generate cash
that would not reflect taxable income, but even the gross income
from rentals does not explain the source of these funds. While
Mr. Zurn did sell some property for approximately $104,000, that
and the gross rents are far from the $1 million allegedly lent.
Taking all the confusion, contradictions, and other
anomalies in Mr. Zurn's and petitioner's testimonies into
account, we do not find it believable that loans from Mr. Zurn
9 Mr. Zurn testified that
The source would have been previous monies that I
had, it would have been real estate money, it
would have been any property that was sold, it
would have been borrowed money, it would have been
family money, what--what I had, you know, the
different sources.
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