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notes payable to petitioner. Petitioner explains that the loan
was not listed as one to him from DRPC for internal bookkeeping
purposes, i.e., the other loan was from his own funds, and the
one shown as from Frost Bank actually was from the proceeds
petitioner obtained from Frost Bank. Similarly, petitioner
claims that the bank notes were executed by himself and DRPC for
bookkeeping purposes. We are not persuaded by this argument. We
acknowledge that the bank was not concerned with who took out the
loan so long as Don Test offered collateral and a personal
guaranty. We are not persuaded that DRPC listed the loans on its
returns as it did for internal bookkeeping purposes; rather, it
seems that such loans were shown as coming from Frost Bank
because they were in fact from Frost Bank to DRPC.
Petitioner argues that he alone had the power to decide how
to capitalize DRPC. He also argues that he obtained the loan in
his individual capacity. We agree that he obtained the loan, but
note that he was the only officer and shareholder of DRPC, and
therefore he was the only agent who could obtain a loan for that
corporation. The fact is that petitioner executed the notes both
personally and as the president of DRPC; we find that rather than
obtaining the credit line from Frost Bank while acting in his
personal capacity, he obtained the loans while acting in his
personal capacity and as the agent of DRPC.
Respondent determined that this alleged debt from DRPC to
petitioner will not give rise to basis under section 1366(d)(1).
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