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created a direct indebtedness of Ram to Jerry. We conclude that
Jerry’s basis in Ram for 1995 may not be increased by this
amount.
1996 Disputed Items
1/3/96 and 1/10/96 Payments
We do not find any credible evidence in the record that
Inter-Con was an agent for Jerry when it transferred the relevant
funds. We conclude that Jerry is not entitled to increase his
basis in Ram on account of either of these payments.
3/20/96 Payment
On March 20, 1996, Mattel wrote a $200,000 check to Jerry,
and Jerry deposited the check in Inter-Con’s account. One day
later, Inter-Con wrote a $200,000 check to Ram. We have received
no credible explanation of why funds payable to Jerry were
deposited in Inter-Con’s account.
Petitioners selected the form of the funds flow and are
bound by the form they selected. Harris v. United States, supra
at 443. Moreover, they offered no credible explanation why we
should not respect the form of this transaction. That form
supports the conclusion of an investment in or loan to Inter-Con
by Jerry and a loan by Inter-Con to Ram.
In these circumstances, petitioners failed to meet their burden
of proving that Inter-Con advanced funds to Ram as Jerry’s agent,
that direct indebtedness resulted from Ram to Jerry, or that
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