- 15 -
f. The treatment of the disbursements on the corporate records
Goshorn recorded the disbursements to petitioner as loans on
its corporate books. Petitioner and Mr. Sweet discussed the
disbursements for the purpose of preparing Goshorn's financial
statements and tax returns. Additionally, the disbursements were
disclosed to Goshorn's bank during the process of negotiating
loans from the bank. These circumstances weigh in favor of
treating the disbursements as loans.
g. The creation of legal obligations
Taking into account the absence of any loan documentation,
petitioner failed to prove that any definite maturity date
existed for the loans. During the years in issue, the only funds
that Goshorn credited against petitioner's shareholder loan
account consisted of the rent that Goshorn owed petitioner for
the use of the Eudora property. Goshorn's rent was $5,000 per
month. For the 1987 and 1990 tax year, Goshorn credited $60,000
each year to petitioner's loan account for rent; i.e., 12 months
at $5,000 per month. However, in 1988 and 1989, Goshorn only
paid $50,000 and $25,000 in rent respectively. Thus, for 1988
and 1989, petitioner only reduced his shareholder loan amount by
$50,000 and $25,000. Therefore, for 1988 and 1989, there was no
regular repayment schedule.
Petitioner has failed to prove a fixed maturity date and has
not made fairly regular repayments. Thus, he has failed to prove
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011