- 13 -
1999. Mr. Lenzen and Mr. Schoenecker credibly testified that
they lent money to RAF over the years and that they were paid
interest on the loans. They documented these loans and RAF’s
payments of interest and principal on a ledger for each year.
The loans were repaid in full as part of the sale of RAF in 2002.
However, the record does not show that RAF’s payments of the
Lenzens’ personal expenses were intended to be repayments of Mr.
Lenzen’s loans to RAF. Mr. Lenzen and his accountant admitted
that the corporate card payments were not recorded as loan
repayments or interest payments on the 1999 loan ledger or in any
of RAF’s corporate records. Mr. Lenzen testified that he
intended to record them that way but “I just procrastinated and I
never did it.” Petitioners’ accountant had no knowledge that RAF
paid any of the Lenzens’ personal expenses. Most importantly,
RAF claimed as business expenses all of the Lenzens’ corporate
card charges. Mr. Lenzen and RAF did not attempt to identify
which charges were purportedly loan repayments until trial.
Petitioners’ current characterization of the unexplained charges
as loan repayments contradicts petitioners’ actions at the time
the payments were made, and we do not accept petitioners’ current
position. See, e.g., Noble v. Commissioner, 368 F.2d 439, 443-
444 (9th Cir. 1966) (shareholders’ alteration of corporate
records 2 years after payment was not sufficient to properly
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011