Karns Prime & Fancy Food, Ltd. - Page 20

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          January 30, 2000.  In that return, petitioner did not include the           
          $1.5 million at issue in gross income.                                      
               Respondent issued a notice of deficiency (notice) to peti-             
          tioner with respect to the year at issue.  In the notice, respon-           
          dent determined that petitioner is required to include the $1.5             
          million at issue in gross income for that year.                             
               Although respondent must have commenced respondent’s exami-            
          nation of petitioner’s return for the year at issue after July              
          22, 1998, the parties do not address section 7491(a).16  In any             
          event, we need not decide whether the burden of proof shifts to             
          respondent under that section.  That is because resolution of the           
          issue presented here does not depend on who has the burden of               
               The parties’ sole dispute is whether the $1.5 million at               
          issue constitutes a loan that is includable in petitioner’s gross           
          income for the year at issue.                                               
               The determination of whether a transfer of funds constitutes           
          a loan is a question of fact.  Haber v. Commissioner, 52 T.C.               
          255, 266 (1969), affd. per curiam 422 F.2d 198 (5th Cir. 1970).             
          In order for a transfer of funds to constitute a loan, at the               
          time the funds are transferred there must be an unconditional               

               16All section references are to the Internal Revenue Code in           
          effect for the year at issue.                                               

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