George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 33

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            In Baird, this Court also addressed the issue of journal entries                               
            as payments and stated:                                                                        
                  Separate treatment of the joint accounts on the books                                    
                  is not sufficient to support a contrary view in the                                      
                  light of all the surrounding circumstances, and the                                      
                  $17,540 debit from the cash journal to "Notes                                            
                  Receivable" account was simply a shift from one account                                  
                  to another.  There is nothing here to indicate a plan                                    
                  or intention to repay, and the conduct of the parties                                    
                  over a period of years supports a contrary view.                                         
                  [Baird v. Commissioner, 25 T.C. at 394.]                                                 
                  Disregarding the repayments that consisted of journal                                    
            entries made in 1991, the repayments are insubstantial in                                      
            relation to the advances.  Failure to repay an ever mounting loan                              
            balance points to constructive dividends.  See Baird v.                                        
            Commissioner, T.C. Memo. 1982-220.                                                             
                  Georgiou also relies on the treatment of the advances on the                             
            books and tax returns of Kolonaki to establish that the advances                               
            were loans.  Kolonaki recorded the advances in the Loan to                                     
            Shareholder account.  Although the treatment of the advances is                                
            an important factor to consider, it must be considered in                                      
            relation to the other facts that would indicate a loan.                                        
                  While it is true that the absence of the notes and the                                   
                  failure to charge or pay interest are not alone                                          
                  conclusive on the basic issue, it is equally true that                                   
                  the treatment of * * * [the taxpayers'] withdrawals on                                   
                  the corporate books as "Notes Receivable" is not                                         
                  controlling, since it is well settled that book entries                                  
                  may not be used to conceal realities as a means of                                       
                  relieving the taxpayer from liability for income taxes.                                  
                  * * *  [Baird v. Commissioner, 25 T.C. at 395.]                                          

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