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The notes were not reduced in 1989 by amounts commensurate
with the alleged loan repayments. The 1989 GAPS notes, Nos. 5
through 7, equal $128,181, whereas the 1990 GAPS notes, Nos. 8
through 10, equal $64,028. This illustrates a reduction in total
loans for GAPS in 1989 of $64,153, compared with the total amount
of GAPS payments to petitioner of at least $104,564. This still
leaves a difference of more than $40,000.
The JJM calculations show similar discrepancies. The 1989
JJM notes, Nos. 3 and 4, equal $73,381, whereas the 1990 JJM
notes, Nos. 5 and 6, equal $59,589. This would indicate a
reduction in total loans for JJM in 1989 of $13,792, compared
with the total amount of JJM payments to petitioner of at least
$39,553, leaving a difference of more than $25,000. There is no
evidence that petitioner lent GAPS or JJM any cash or property in
1989 that would account for these differences.13 The lack of
correlation between the face amounts of the notes and the amounts
shown on the pro forma Schedules L belies petitioner's position.
We conclude that petitioner's transfers to GAPS and JJM
constituted equity investments rather than debt. Therefore, the
amounts that GAPS and JJM paid to petitioner, or on his or his
family's behalf, were not repayments of shareholder loans but
13Petitioner claimed that the Mass Mutual payments account
for some of this difference. However, we have already taken the
Mass Mutual salary check and payments into account in reducing
the amount of the total corporate payments.
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