-286-
Ballard’s explanation for this transaction and petitioners’
treatment of the matter in their reply brief are contradictory.
It is not clear that TMT ever owned shares in Fairfield Planting
Co. that it could transfer to Ballard. See Petitioners’ Reply
Brief at 625-626. In any event, Ballard’s testimony suggests the
asset he received, described by him as stock in Fairfield
Planting Co., was worth considerably more than the $100,000
charged to him as a loan. Finally, the terms of Ballard’s
promissory note associated with this transaction suggest self-
dealing and an effort to create an instrument for a debt that
would never be repaid. In the absence of any evidence in the
record that TMT ever received any payments (interest, dividends,
or otherwise) attributable to Ballard’s promissory note, we
conclude that the promissory note was a sham.
TMT’s records show that in 1988, TMT purportedly purchased
$15,000 of stock in Ficom International, Inc., a corporation
organized by Ballard’s daughter, Melinda Ballard. The entry
reflecting the investment includes a handwritten notation “W/O in
1989.” In 1989, TMT recorded in its trial balance ledger a
$15,000 long-term capital loss on its investment in Ficom.
Adjusting journal entry No. 6 explained the writeoff as follows:
“To w/o worthless stock of Ficom as per note on 1988 TB [trial
balance]”. TMT claimed this loss as a deduction on its 1989 tax
return.
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