- 22 -
be transferred to a trust to be created by Ray Sowards,
the terms and conditions of which are private between
Robert Strong and Ray Sowards, and not to be disclosed.
Payments to the created trust will be on the same basis
as paragraph 1, above, beginning January 1, 2002.
An American Express Card will be furnished to Ray
Sowards, and all legitimate expenses will by [sic]
Systems Two/Robert Strong for Travel Expenses.
This agreement may be modified by the two parties only
in writing.
Dated: January 6, 1996[24]
There are what appear to be signatures at the bottom of the
document.25
In challenging respondent’s imputation of additional taxable
income, Mr. Sowards argues that all the moneys received from STL
were loans and, thus, nontaxable.
The characterization of advances as loans must be distilled
from all the evidence. Dixie Dairies Corp. v. Commissioner, 74
T.C. 476, 493 (1980). “Loans are identified by the mutual
understanding between the borrower and lender of the obligation
to repay and a bona fide intent on the borrower’s part to repay
the acquired funds.” Collins v. Commissioner, 3 F.3d 625, 631
(2d Cir. 1993) (emphasis in original omitted), affg. T.C. Memo.
1992-478. The ultimate question is whether there was a “genuine
24We note that this date is after the 1995 payments from
STL.
25Only Mr. Sowards testified that the document bore his and
Mr. Strong’s signatures.
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