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a fixed schedule for repayment, records that may reflect the
transaction as a loan, and the borrower’s solvency at the time of
the loan. Id. at 783-784. The key factor is whether the parties
actually intended and regarded the transaction as a loan. Estate
of Van Anda v. Commissioner, 12 T.C. 1158, 1162 (1949), affd. per
curiam 192 F.2d 391 (2d Cir. 1951).
Respondent contends that petitioner failed to substantiate
the amount of the purported business bad debt and to demonstrate
that such debt was bona fide. Petitioner asserts that the notes
receivable were substantiated by the 1987 promissory note, the
1980 Touche Ross & Co. audit report, and the 1994 Yeo and Yeo
audit report. We disagree.
At trial petitioner produced the $28,056.41 promissory note
signed by James Fedewa on January 1, 1978. Although the 1978
promissory note bore interest of 8 percent, the note did not
provide a discernable due date; thus, we find the enforcement or
demand of repayment on this note highly suspect. Furthermore,
petitioner failed to provide any credible evidence to establish
the origin of the $5,008.92 note receivable in 1976, to which
principal the 1978 promissory note added, or the subsequent
increases from 1978 through 1984. Although the origin of the
notes receivable is unclear, petitioner does not dispute that the
purported debt in issue arose from related party transactions.
The record is devoid of any helpful information as to the
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