- 32 -
guided and engineered the entire transaction step by
step.
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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