Estate of Kimberly A. Hicks, Deceased, Key Trust Company of Ohio, N.A., Administrator - Page 13




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          review the allocation.  They tell us to review the bona fides of            
          the loan.  Decades ago, we held that the “bona fides of a loan              
          are primarily established by the intention of the parties that              
          repayment will be made pursuant to the terms of the agreement.”             
          Estate of Ribblesdale v. Commissioner, T.C. Memo. 1964-177.  The            
          Commissioner isn’t really contesting the existence of that                  
          intention--it is uncontroverted that Kimberly’s trust was paying            
          interest to Clyde.  We also specifically find that all the                  
          parties to the trust arrangement intended that the loan would be            
          repaid if either of the stated conditions--Kimberly’s death or              
          need to get on Medicaid--were met.  In Estate of Labombarde v.              
          Commissioner, 58 T.C. 745, 753 (1972), affd. 502 F.2d 1158 (1st             
          Cir. 1973), we held that the children’s support payments to their           
          mother were not a loan because there was no note evidencing the             
          supposed debt and no interest was ever paid.  Here, the facts are           
          in complete contrast:  The note was executed and admitted into              
          the record, and Clyde was paid interest every month on the                  
          principal amount of the loan.                                               
               The Commissioner does make a good point by noting that the             
          Probate Court specifically mentioned at the settlement hearing              
          only $415,000 as compensation to Clyde.  He concludes from this             
          that the extra $1 million allocated to Clyde in the papers                  
          approved by the Probate Court transformed the allocation into               
          nothing more than an “uncontested, nonadversarial, and entirely             







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