Mann Construction Co., Inc. - Page 18




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          advances.  Three other witnesses--petitioner's long-time                    
          bookkeeper, Judy Williams, petitioner's long-time accountant,               
          Ryan Patrick, and petitioner's bonding agent from 1987-91, Eric             
          Sander--also testified on behalf of petitioner, on the basis of             
          their personal knowledge of petitioner's business, including the            
          business relationship between petitioner and Mark Mann.                     
               We found the testimony of all five witnesses credible,                 
          forthright, and consistent.  In addition, we note that Richard              
          Mann, although he is not a lawyer, very ably represented                    
          petitioner at trial.                                                        
               The entire record discloses that some of the traditional               
          indicia of a debtor-creditor relationship were present in this              
          case, and that some were not.  For example, there was no fixed              
          schedule for repayment, no collateral, and no written loan                  
          agreement (other than the notes), and petitioner never demanded             
          payment, much less took legal action to try to enforce repayment.           
          However, starting within a short time after the advances                    
          commenced, the advances were evidenced by notes; interest was               
          charged; and petitioner's accounting records and financial                  
          statements reflected the advances as loans.  More importantly,              
          petitioner reported the advances as loans on its tax returns, and           
          accordingly included substantial amounts of interest in its                 
          taxable income.  In addition, Mark Mann made some repayments from           
          time to time, including one relatively large repayment of                   





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