Glenn H. and Diane J. Flood - Page 14




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          for the 1990 tax year, the source of that interest has not been             
          shown.  In addition, $125 of interest income is wholly                      
          disproportionate to the $107,036 that petitioner alleges he lent            
          to his father.                                                              
               Although petitioner’s father owned assets other than the               
          auction, such as rental property and the land on which FAP’s                
          business was situated, petitioner did not require security to               
          guard against default.  Further, petitioner did not protect his             
          position to collect from his father’s assets in the event of                
          competing creditors.  Petitioner did not seek collection or                 
          repayment from his father.  Petitioner’s testimony was that he              
          did not ask his father for repayment because “he is my father”.             
               Petitioner contends that his father made two lump-sum                  
          partial repayments and that those repayments are indicia of bona            
          fide debt.  However, there was no contemporary repayment                    
          schedule, and the only evidence of repayment was a handwritten              
          schedule submitted for trial purposes.  The schedule submitted              
          for trial reflected that the first repayment of $19,505 was made            
          to the lending bank and the second repayment of $13,000 was made            
          to petitioners.                                                             
               We review transactions between family members with                     
          heightened scrutiny.  See Caligiuri v. Commissioner, 549 F.2d               
          1155, 1157 (8th Cir. 1977), affg. T.C. Memo. 1975-319; Perry v.             
          Commissioner, 92 T.C. 470, 481 (1989), affd. without published              
          opinion 912 F.2d 1466 (5th Cir. 1990).  Loans between family                





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