George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 32

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                  guided and engineered the entire transaction step by                                     
                  In Baird v. Commissioner, 25 T.C. at 394-395, we reached a                               
            similar conclusion:                                                                            
                         Nor do we regard the giving of demand notes dated                                 
                  February 2, 1953, to Baird & Company * * * of any                                        
                  significance as indicating that [taxpayer's]                                             
                  withdrawals constituted debts, since this was done only                                  
                  after the revenue agent took the position that the                                       
                  "loans" were in fact disguised dividends.  To us, it is                                  
                  incredible that the Baird brothers would have waited                                     
                  more than 6 years to execute a note for the $17,540 if                                   
                  they had intended to do so in the first place.  It                                       
                  seems obvious that the execution of the notes was a                                      
                  mere afterthought directed to an effort to give the                                      
                  withdrawals a character which they did not have during                                   
                  the years when they were made.  * * *                                                    
                  Accordingly, the backdated documents that provide an                                     
            interest rate and maturity date will be given little weight in                                 
            our determination because they were created after the years in                                 
            issue and substantially later than the actual advances.  "The                                  
            determinative fact is the intention as it existed at the time of                               
            the transaction.  This intention cannot be vitiated by changed                                 
            circumstances or subsequent action bred in the cold light of tax                               
            consequences."  Saigh v. Commissioner, supra at 420.                                           
                  Georgiou's repayments of advances consisted primarily of                                 
            adjustments to journal entries.  Total advances for 1989 and 1990                              
            were $857,360 and $2,608,562, respectively.  The 1989 repayments                               
            consisted of a check for $325,000 and a journal entry.  All of                                 
            the 1990 repayments were journal entries made in 1991 in an                                    
            attempt to reduce the balance of the Loan to Shareholder account.                              

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