George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 36

                                                 - 36 -                                                    
            burden of proof on this issue.  Therefore, we sustain                                          
            respondent's determination that the advances to Georgiou from                                  
            Kolonaki were constructive dividends and not loans.  Accordingly,                              
            respondent's determination that there is no allowable business                                 
            interest deduction on the advances is also sustained.                                          
                  Because we have concluded that Georgiou did not transfer JAI                             
            stock to Kolonaki during the years in issue, we need not consider                              
            whether Georgiou would have received a section 304 dividend as a                               
            result of such a transfer.                                                                     
            III.  GRS                                                                                      
                  GRS contends that the value of its 1989 opening inventory                                
            was $935,181.  GRS reached this conclusion based on a lengthy                                  
            analysis of fair market value.  Respondent contends that the                                   
            correct valuation is determined by sections 351(g)(2) and 362(a).                              
                  GRS obtained its 1989 opening inventory from Kolonaki.  When                             
            Kolonaki divested itself of its retail division, Kolonaki                                      
            transferred assets, including inventory, to GRS in exchange for                                
            GRS stock.  The exchange was treated as a section 351 exchange.                                
            Section 351(g) refers to section 362(a), which sets forth the                                  
            basis of the transferred assets:                                                               
                  SEC. 362 BASIS TO CORPORATIONS.                                                          
                         (a) Property Acquired by Issuance of Stock or as                                  
                  Paid-In Surplus.--If property was acquired on or after                                   
                  June 22, 1954, by a corporation--                                                        
                               (1) in connection with a transaction to which                               
                         section 351 (relating to transfer of property to                                  
                         corporation controlled by transferor) applies, or                                 

Page:  Previous  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  Next

Last modified: May 25, 2011