Ray W. and Marilyn S. Sowards - Page 24

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          disclosed.”27  At trial, Mr. Sowards failed to state the terms              
          and conditions of the alleged trust he was to create.  The books            
          and records of STL were not presented to the Court to assist in             
          determining how STL characterized these payments.28  There was no           
          collateral for these purported loans.  Mr. Sowards indicated that           
          he had no present means of paying back the amounts purportedly              
          borrowed.                                                                   
               The sole testimony of Mr. Sowards is not sufficient to                 
          establish the existence of an actual indebtedness.  On this                 
          record, we are convinced that the funds transferred from STL/Mr.            
          Strong to petitioners/WPA were not loan proceeds.  Indeed, the              
          evidence clearly establishes that the payments from STL to WPA              
          were taxable income to Mr. Sowards.                                         
                    (c)  Other Deposits into WPA’s Bank Account                       
               In 1996 and 1997, funds were deposited into the WPA bank               
          account in addition to STL moneys.  In 1996, an additional                  
          $21,773.86 was deposited into the WPA bank account.29  Examples             
          of the additional items are:  (1) A check from Alan D. Telebaum             


               27Accrued interest was not due until the principal was due.            
               28Clearly, such information would be helpful since the                 
          intent of the parties is “perhaps the ultimate question.”  Dixie            
          Dairies Corp. v. Commissioner, 74 T.C. 476, 495 (1980).                     
               29In fact, a total of $152,317.86 was deposited into the WPA           
          bank account.  Of that, $2,544 represents nontaxable deposit                
          items since Mr. Sowards transferred those sums from a different             
          account.                                                                    




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