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basis in Ram was at least $1,150,000. That minimum basis does
not reflect certain disputed items (1995 disputed items) related
to Ram’s receipt of two checks in late 1995. First, on
November 16, 1995, Inter-Con wrote a $60,000 check to Ram,
Inter-Con wrote a $65,000 check to Twist-Tex, and TSI wrote a
$125,000 check to Inter-Con to cover the two checks that it wrote
(November Inter-Con payment). TSI’s 1995 books and records
(collectively, records) treated the $125,000 check to Inter-Con
as a loan receivable from Ram and Twist-Tex. Ram’s 1995 and 1996
records treated the $60,000 check as a note payable to Inter-Con.
Inter-Con’s 1995 records treated the $60,000 and $65,000 checks
as notes receivable from Ram and Twist-Tex, respectively, and
treated the $125,000 check as a note payable to TSI. Second, on
December 5, 1995, Jerry’s brother Perry (Perry) wrote Ram a
$100,000 check, and TSI wrote Perry a $100,000 check to cover the
clearance of Perry’s check (December 1995 payment). TSI’s 1995
records treated its $100,000 check as a loan receivable from
Perry/Ram. Ram’s 1995 records initially treated its receipt of
Perry’s $100,000 check as a loan from Jerry to Ram. That
treatment was changed as of the end of that year to show the
check as a loan from Perry to Ram. Ram’s 1996 records treated
its receipt of Perry’s $100,000 check as a note payable to Perry.
During 1996, respondent commenced his examination of
petitioners for the subject years and requested substantiation of
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