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Enterprises, Inc./Hungarians’ Sunday (LERC), a family corporation
that Lorant established in 1981.4 At all relevant times, Lorant
was the director and secretary-treasurer, and Elizabeth was the
president.
Sometime in 1997, LERC lent approximately $77,640 to Lorant,
Elizabeth, and petitioner, collectively.5 In March 1998, Lorant
began receiving approximately $753 in Social Security disability
benefits. In 1998 and 1999, Lorant and Elizabeth did not receive
a salary from LERC.
Because of financial constraints, Lorant and Elizabeth sold
their home in Thousand Oaks in 1998 and moved into petitioner’s
Victorville home. At all relevant times, Lorant and Elizabeth
resided by themselves in the Victorville home.
D. Petitioner’s 1998 and 1999 Income Tax Returns
Lorant prepared petitioner’s 1998 and 1999 income tax
returns. Petitioner executed his 1998 income tax return on
February 14, 1999, and filed it on or before April 15, 1999.
Petitioner executed his 1999 income tax return on February 11,
2000, and filed it on or before April 15, 2000.
4 LERC’s business operations consisted of owning several
properties, a printing company, and a mailing company.
5 The record does not disclose what part of the total was
lent to each individual, but the record indicates that a portion
was lent to petitioner to buy a car. By the end of the taxable
year 1998, there was an outstanding loan of $69,230 to LERC’s
stockholders.
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