Larry W. and Cynthia J/ Van Wyk - Page 3

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          that shareholder's wife; and (2) whether petitioners are liable             
          for substantial understatement penalties under section 6662.                
               The parties submitted the instant case fully stipulated                
          pursuant to Rule 122.  The facts stipulated by the parties are              
          incorporated herein by reference and are found as facts in the              
          instant case.  When they filed their petition, petitioners                  
          resided in Monroe, Iowa.                                                    
               During the years in issue, petitioner Larry Van Wyk                    
          (petitioner) and his brother-in-law, Keith Roorda, each owned 50            
          percent of the stock of West View of Monroe, Iowa, Inc. (West               
          View), an S corporation engaged in the business of farming.                 
               On December 24, 1991, petitioners borrowed $700,000 from               
          Keith Roorda and his wife, Linda Roorda.  To evidence their debt            
          to Keith and Linda Roorda (the Roordas), petitioners executed a             
          promissory note bearing interest at 10.5 percent per annum.  The            
          note was unsecured.  Also, on December 24, 1991, petitioners                
          transferred $700,000 to West View.  Of that amount, $253,583                
          retired debts petitioners owed to West View with the remaining              
          $444,417 constituting indebtedness owed by West View to                     
          petitioners (the loan).                                                     
               On their tax returns for 1988 through 1993, petitioners                
          reported one-half of the profits and losses from West View.                 
          Respondent determined that petitioners' income should be                    

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