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Georgiou in 1990 can be recharacterized as a business interest
expense under section 163(a); whether ownership of JAI stock was
transferred from Georgiou to Kolonaki during 1989 or 1990,
creating a dividend under section 304; and whether Georgiou is
liable for penalties under section 6662 for 1989 and 1990. The
issue remaining for decision as to Georgiou Retail Stores (GRS)
is whether GRS's cost of goods sold in 1989 must be reduced by
$130,181.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference. The
Georgious were residents of California, and Kolonaki and GRS had
their principal places of business in California, at the time the
petitions were filed.
Kolonaki
Georgiou incorporated Kolonaki in California in 1975 as a
retail store that sold giftware and clothing from various parts
of the world, predominantly merchandise from Greece. Prior to
founding Kolonaki, Georgiou had obtained degrees in economics and
mathematics and had worked as a systems analyst. Kolonaki was
wholly owned by Georgiou from incorporation throughout the years
in issue. From 1975 through 1987, Kolonaki expanded to include
both wholesale and retail operations. By 1988, the retail
division consisted of approximately 26 stores named "Georgiou".
The "Georgiou" stores' merchandise consisted primarily of
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