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Notice of Deficiency
On February 28, 1997, respondent issued a notice of deficiency
increasing petitioners' 1991 taxable income by $295,315,
attributing $271,836 of this amount to payments petitioner received
from Mr. Garcia and/or AVD and LI. Respondent also determined a
section 6662(a) accuracy-related penalty but, as noted, now
concedes the penalty.
ULTIMATE FINDINGS OF FACT
The $271,836 petitioner received from Mr. Garcia and/or AVD
and LI in 1991 were loans.
OPINION
The issue for decision centers on the characterization of the
$271,836 petitioner received during 1991 from Mr. Garcia and/or AVD
and LI. Petitioners maintain that these payments were loans;
respondent contends they constitute income.
Whether an advance is characterized as a loan or income is a
factual question which we determine by considering the entire
record. See Fisher v. Commissioner, 54 T.C. 905 (1970). In order
for a bona fide loan to exist, two requirements are necessary: (1)
A good faith intent to make repayment on the part of the recipient
of the funds, and (2) a good faith intent to enforce repayment on
the part of the lender of the funds. See, e.g., id. at 909-910.
Petitioners have the burden to prove that the payments from
Mr. Garcia and/or AVD and LI were loans. See Rule 142(a); Welch v.
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Last modified: May 25, 2011