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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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