Donald J. and Judith E. Peracchi - Page 13

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               We have held on more than one occasion that in the closely             
          held corporation context, loan repayments that commenced only               
          after a taxpayer had notice of an IRS audit go far to weaken the            
          payments as persuasive evidence of a preexisting intention of               
          paying on schedule, or at all.  See, for example, Tollefsen v.              
          Commissioner, 52 T.C. 671, 680 (1969), affd. 431 F.2d 511 (2d               
          Cir. 1970); Piekos v. Commissioner T.C. Memo. 1982-602; Granzotto           
          v. Commissioner, T.C. Memo. 1971-106; see also Williams v.                  
          Commissioner, 627 F.2d 1032, 1034 (10th Cir. 1980) (repayment of            
          taxpayer notes in stockholder control situation not made until              
          after taxpayers were aware that their returns were to be audited,           
          thus constituting a mere formalism of no great significance),               
          affg. T.C. Memo. 1978-306.                                                  
               Petitioners apparently wished to keep their commitments to             
          their financially troubled consolidated group of corporations as            
          ephemeral as possible.  Although Ernst & Young advised                      
          petitioners in February, 1990, that the Capital Note would be               
          treated as a nonadmitted asset for purposes of computing NALICO's           
          capital-to-premium ratio under State insurance company                      
          regulations, the record reflects no effort by petitioners to                
          rectify the situation, although their very substantial net worth            
          exclusive of their NAC Corporation holdings would make it seem              
          probable that they could have done so.  From this, and from                 
          petitioners' and NAC Corporation's general indifference to                  




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