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stipulated facts accordingly. James R. Peacock (Mr. Peacock) and
Myrtice L. Peacock (Ms. Peacock) are husband and wife, and they
filed joint Federal income tax returns for the subject years.
They resided in Ponce Inlet, Florida, when they filed their
petition with the Court.
Mr. Peacock has worked in the automobile industry for
approximately 20 years, and he has owned various automobile
dealerships. One of those dealerships, Speedway Dodge, Inc.,
formerly known as Hurley Dodge, Inc. (the dealership), was
located on Florida’s east coast. In or about 1993, Mr. Peacock
spoke to an acquaintance (the acquaintance) living on Florida’s
west coast about working for the dealership as its general
manager. Mr. Peacock persuaded the acquaintance to accept the
position by causing the dealership to lend $50,000 to the
acquaintance to use as a downpayment on a condominium near the
dealership. Mr. Peacock believed that the acquaintance would pay
the money back to the dealership when the acquaintance had the
money to do so.
In October 1993, Mr. Peacock sold 51 percent of his 100-
percent ownership interest in the dealership to spend more time
with his wife in an activity, fishing, that they had both enjoyed
since their childhood. At or about the time of sale, the
acquaintance moved back to Florida’s west coast without having
made any payments on the loan. When the acquaintance moved back
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