- 13 -
entities to which petitioner made (indirect) loans were not owned
entirely by petitioner’s shareholders. In support of its
approach, petitioner first focuses on the statutory language.
Petitioner argues that the singular use of the term “shareholder”
in the phrase “between a corporation and any shareholder” is
intended to reflect that attribution rules do not apply.
Respondent’s counsel, for the record, states that there was no
reliance on the attribution rules of sections 267 and 318 in this
case. Section 7872 does not require that a corporate loan be
made to a controlling or majority shareholder. The statutory use
of the term “any” preceding the term “shareholder” would obviate
the need for respondent to rely on attribution rules for
application of section 7872 in connection with a transaction with
a minority shareholder. Petitioner’s argument concerning the
loans made directly to its shareholders is refuted by the plain
language of the statute.
As to the “indirect” loans, respondent’s argument is that
petitioner’s shareholders are members of the same family and that
they, along with other family members, own the entities to which
indirect loans were made. In that regard, Claud Tharp (father of
three of petitioner’s shareholders and father-in-law of the
fourth) is the only nonshareholder with a substantial interest in
the two entities to which the vast majority of the indirect loans
were extended.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011