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loan proceeds to repay a preexisting note Goshorn owed the bank.
Goshorn reduced petitioner's shareholder loan account by the
amount of proceeds. This loan was secured by a lien on peti-
tioner's principal residence. These repayments weigh in favor of
treating the disbursements as loans.
Summary
In summary, despite petitioner's testimony that he intended
the advances to be loans, the objective factors heavily weigh in
favor of constructive dividends. Therefore, we sustain respon-
dent's determination that, for tax years 1987, 1988, 1989, and
1990, the amounts of $21,040, $216,621, $52,775, and $102,196,
respectively, constitute dividends to petitioner rather than
loans.
Addition to Tax for Late Filing
Section 6651(a)(1) imposes an addition to tax for a tax-
payer's failure to timely file a return, unless the taxpayer
shows that the failure is due to reasonable cause. The amount
added to the tax is 5 percent of the tax required to be shown on
the return if the failure is for not more than one month, with an
additional 5 percent for each additional month or fraction there-
of during which the failure continues, but not to exceed 25 per-
cent in the aggregate. Sec. 6651(a)(1); sec. 301.6651-1(a)(1),
Proced. & Admin. Regs. For purposes of calculating the addition
to tax, the date prescribed for filing is determined by taking
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