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Mattel’s 1997 books were later changed to reflect that the note
was payable to Jerry rather than TSI, and the amendment was made
by marking through “TSI” and writing “Jerry Thomas” thereafter.
Ram executed a $200,000 promissory note dated July 10, 1996, to
Jerry. On Ram’s 1996 balance sheet, which was prepared after
respondent commenced his audit, this transaction is shown as part
of $1,968,000 due to Jerry.
The form of the transaction supports a conclusion that there
was an investment or loan by Inter-Con in or 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 Jerry
made the required economic outlay. Jerry may not increase his
basis in Ram by the $200,000 advanced by Inter-Con to Ram.
12/18/96 Payment
On December 18, 1996, Mattel wrote a $100,000 check to
Regions Bank, and Regions Bank issued a $100,000 cashier’s check
which was negotiated by Ram. As with the Inter-Con-Ram 7/10/96
payment, there is insufficient evidence to convince the Court of
Jerry’s direct investment in Ram.
For the same reasons set out in relation to the 7/10/96
payment, petitioners failed to meet their burden of proving that
Mattel advanced funds to Ram as their agent, that direct
indebtedness resulted from Ram to Jerry, or that Jerry made the
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