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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
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