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petitioner's accountant, Mr. Dutton, recognized in a memorandum
to the file in September 1977 that the advances by McCabe and
petitioner were contributions to capital and that further
contributions would be needed.
All of the objective indications are that the advances by
petitioner and McCabe were made under terms and conditions that a
commercial lender would not grant, were subordinated to such
commercial debt, and were in exact ratio to stockholdings. We
think such advances are properly characterized as contributions
to capital and not debt. When petitioner fleetingly received the
title to the properties before signing them over to Kenyon
College, he did not include the properties in his income as a
dividend or otherwise treat his receipt of the properties as an
occasion for recognizing gain. Therefore, he had no basis in
such properties. Having a zero basis in the realty, petitioner
would have had at least $657,000 of short-term gain if the realty
had been sold. Thus, his $657,000 contribution is reduced to
zero.
Accordingly, we conclude that the charitable contribution
limitations of section 170(e)(1) apply to reduce petitioner's
allowable charitable deduction to Kenyon College to zero.
VIII. Issue 12--Losses From Trusts, Partnerships, Subchapter S
Corporation, and Farming Operations
For the years 1979 and 1980 petitioner claimed losses on his
tax returns attributable to the Bowling Green partnership of
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