- 13 -
Code. Secs. 301(c)(1), 316(a); Dolese v. United States, supra at
1152. During the tax years at issue, Goshorn reported earnings
between $867,000 and $990,000. The disbursements to petitioner
were never greater than Goshorn's retained earnings.
Goshorn never declared a dividend for any of the years that
petitioner owned and operated it. These factors militate against
a finding of a bona fide loan. Crowley v. Commissioner, supra at
1085.
d. The use of customary loan documentation
Petitioner did not execute any notes to Goshorn reflecting
his obligation to repay these amounts. Additionally, Goshorn was
never provided a security interest against any of petitioner's
property. Customary loan documentation is not a prerequisite to
a bona fide loan, but "its absence unquestionably is relevant to
the parties' intent." Id. at 1082. The absence of loan
documentation leaves the taxpayer "with one less string to strum
for the factfinder." Id.
e. The ability of the shareholder to repay
"Whether the shareholder, at the time of the disbursement,
has a realistic ability to repay it is a factor which sheds light
on his intentions." Baird v. Commissioner, T.C. Memo. 1982-220.
Petitioner testified that the sums in question were intended
to be fully repaid through the sale of either lot 1 or lot 2 of
the Eudora property. Petitioner testified that, in 1991 or 1992,
he received an offer to purchase lot 2 of the Eudora property for
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