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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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