George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 29

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            the funds were transferred, there was no intent to repay the                                   
            advances because there was no fixed time and plan for repayment;                               
            no maturity date; no ceiling placed on the advances; no                                        
            promissory notes; and the documentation provided at audit                                      
            consisted of backdated corporate minutes, a backdated security                                 
            agreement, backdated promissory notes, and changed accounting                                  
                  Georgiou further asserts that he is entitled to a $76,605                                
            business interest deduction in relation to the advances.                                       
            Respondent contends that there is no allowable interest deduction                              
            because the advances are not loans.                                                            
                  Whether advances from a corporation to its shareholder                                   
            constitute bona fide loans is a factual question and depends on                                
            the existence, at the time the advances occurred, of an intent on                              
            the shareholder's part to repay the advances and an intent on the                              
            corporation's part to enforce the obligations.  Berthold v.                                    
            Commissioner, 404 F.2d 119, 122 (6th Cir. 1968), affg. T.C. Memo.                              
            1967-102.  As the state of a taxpayer's mind at a given time in                                
            the past is not directly ascertainable, we must consider                                       
            objective evidence.  See Baird v. Commissioner, T.C. Memo. 1982-                               
            220.  The issue thus turns upon all of the circumstances                                       
            surrounding the transactions.  Wiese v. Commissioner, 93 F.2d 921                              
            (8th Cir. 1938), affg. 35 B.T.A. 701 (1937).  Where the                                        
            shareholder receiving the advances controls the corporation,                                   

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