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these increases, petitioner received a salary of $180,000 in 1988
compared with $516,232.65 in 1987. In spite of increased gross
profits for 1988 and 1989, petitioner's salary declined from
$180,000 in 1988 to $152,400 in 1989. There is no indication
that there was any limitation on petitioner's ability to pay
himself a salary. He was the sole owner and submitted a business
plan to American Honda.
This salary pattern suggests that petitioner wanted to
protect his equity interest. We hold that petitioner expected
returns primarily from appreciation and earnings on his
investment rather than in the form of salary from personal effort
or labor on his part. United States v. Generes, 405 U.S. at 100-
101. Accordingly, if the auto dealership were successful,
petitioner's reward would be realized primarily through sale or
other disposition of his stock interest, rather than his salary.
Putoma Corp. v. Commissioner, 66 T.C. at 674.
Accordingly, petitioner's dominant motive in paying amounts
pursuant to his guaranty of the floor plan loan was to protect
his investment in the dealership and, accordingly, the resulting
loss was capital in nature, deductible only as a nonbusiness bad
debt.
Accuracy-Related Penalty Under Section 6662(a)
Respondent determined that petitioner was liable for the
accuracy-related penalty pursuant to section 6662(a). Section
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