- 9 -
$193,253 in 2000. No adjusting journal entries were made on any
of the above-mentioned Paulan and Sidal trial balances to
recharacterize either Paulan’s July 11 payment to Sidal or any of
the principal and interest payments by Sidal to Paulan as
consistent with, first, loans by Paulan to petitioners and, then,
loans by petitioners to Sidal.
The November 24 Wire Transfer Payments
The source of the wire transfer payments is not clear from
the record.8 All of the Paulan and Sidal adjusted trial balances
in evidence, beginning with the adjusted trial balances for the
taxable year ending December 31, 1997, reflect the wire transfer
payments as $1 million loans from Paulan to each petitioner and
from each petitioner to Sidal. Sidal made principal and interest
payments directly to Paulan in connection with the wire transfer
payments totaling $276,518 in 1998, $230,431 in 1999, and
$299,561 in 2000.9
8 The parties stipulated that the source of the wire
transfer payments were the $2 million Merchants Bank loan, which
occurred on Dec. 8, 1997, 2 weeks after the wire transfer
payments.
9 As noted, petitioners’ claims of basis in Sidal, under
sec. 1366(d)(1)(B), attributable to the wire transfer payments
were not challenged by respondent in connection with the audit of
petitioners’ 1997 and 1998 returns.
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