Fawzi and Dolores Tay Tay Assaad - Page 20

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          there may have been additional amounts advanced to Mr. Assaad,              
          which we cannot state with certainty were applied to the Atherton           
          project as deductible expenses.                                             
               We might agree that, in certain circumstances, construction            
          loans might provide a basis for estimating deductible expenses or           
          basis.  However, petitioners have not established to our                    
          satisfaction that all the loans that they rely upon herein were             
          construction loans.  Mr. Assaad’s general testimony and his                 
          specific testimony with respect to the First National loans did             
          not assist petitioners in substantiating their construction                 
          expenses or otherwise convince us that the various loans provide            
          a rational evidentiary basis for estimating their expenses.                 
          Indeed, with respect to the additional First National loan of               
          $100,000, Mr. Assaad testified that he could not remember what              
          this additional loan was for or “anything”.                                 
               Further, petitioners have not established that the usual               
          formalities for advancing funds on construction loans were                  
          followed with respect to each of the loans that petitioners rely            
          upon.  With respect to the loans from First National, Mr. Black             
          testified generally regarding the formalities followed with                 
          respect to construction loans.  However, he could not recall the            
          specifics of the loans to Mr. Assaad or Mr. Assaad’s actual                 
          association with those loans.  The record does not reflect, and             
          petitioners did not introduce any evidence, regarding any                   






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