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Georgiou claimed a $100,000 home interest deduction on his
1990 Form 1040 tax return for a portion of the advances that was
allegedly used to remodel his private residence.
Respondent determined that Georgiou's withdrawals from
Kolonaki's line of credit were constructive dividends and not
loans. Respondent further determined that there was no allowable
interest expense because the advances were not loans.
GRS
The GRS 1989 Form 1120 tax return represented the value of
inventory at the beginning of the year as $935,181. The GRS
beginning inventory was transferred from Kolonaki to GRS pursuant
to a section 351 exchange for GRS stock. The Kolonaki books
reflected the transfer of opening inventory to GRS. The basis of
the transferred inventory as it appeared on the Kolonaki books
was $805,000.
Respondent reduced the value of opening inventory that GRS
represented on its 1989 tax return from $935,181 to $805,000.
Respondent maintains that the proper value is the transferor's
basis in the property transferred.
OPINION
Kolonaki, Georgiou, and GRS have the burden of proof on all
issues. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79,
84 (1992); Rockwell v. Commissioner, 512 F.2d 882 (9th Cir.
1975), affg. T.C. Memo. 1972-133.
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