- 26 -
we address the $484,651 and the $120,000 Mrs. Cordes received in
1994 and 1995, respectively, and which have not already been
considered.
a. Interest
In each of 1994 and 1995, CFC deducted $20,000 of the
distributed funds as interest expenses, and Mrs. Cordes included
that $20,000 in income as interest received. Respondent
determined that CFC and Mrs. Cordes improperly treated the funds
as interest because CFC was not indebted to Mrs. Cordes in 1994
or 1995. Respondent therefore disallowed CFC’s deductions and
decreased Mrs. Cordes’s income.
Petitioners contend “The uncontroverted testimony here is
that $200,000.00 was advanced to Cordes Finance Corp. by Edmund
J. Cordes in 1994 * * *. * * * the money was advanced and the
$20,000.00 payments annually do constitute a reasonable rate of
interest (approximately 10%) on these funds.” Petitioners have
confused the facts. We have found the $200,000 was transferred
by Mr. Cordes to CFC in exchange for some of the notes. Mrs.
Cordes did not transfer those funds, nor did the transfer of
$200,000 constitute a loan. Petitioners have failed to
demonstrate that CFC was indebted in any way to Mrs. Cordes,19
19We note that although Mr. Cordes testified that CFC repaid
total loans of approximately $884,000 to Mrs. Cordes’s account
between 1994 and 1995, petitioners have not presented any
corroborative evidence that such loans existed.
Mr. Cordes also testified that some of the funds Mrs. Cordes
received in 1995 may have been repayments of loans she made to
John Cordes. Mr. Cordes’s testimony is inconsistent and not
(continued...)
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011