Allied Marine Systems, Inc. - Page 14

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          Allied's Payment of Petitioner's Personal Expenses                          
               Respondent determined that Allied's payment of petitioner's            
          personal expenses in the amounts of $44,855.00 and $35,604 in               
          1988 and 1989, respectively, was includable in petitioner's gross           
          income.  After a concession by respondent, the amounts remaining            
          in dispute are $40,859 and $31,608 for 1988 and 1989,                       
          respectively.  Petitioner contends that Allied's payments of his            
          personal expenses were nontaxable loan repayments.  Respondent              
          contends that these payments were dividends or, in the                      
          alternative, wages.                                                         
               At trial, the evidence that was introduced by petitioner               
          consisted mainly of his uncorroborated testimony.  We are not               
          required to accept testimony that is improbable or vague.  See              
          Geiger v. Commissioner, 440 F.2d 688, 689-690 (9th Cir. 1971),              
          affg. T.C. Memo. 1969-159.  Petitioner's testimony is not                   
          supported by the minimal records produced at trial and is not               
          consistent with the contemporaneous corporate records.  Allied's            
          1988 Schedule L, Balance Sheet, indicates that at the end of 1988           
          $75,000 was outstanding as shareholder loans and that liabilities           
          and shareholders' equity totaled $129,168.  Allied's 1989                   
          Schedule L does not indicate any amount outstanding as                      
          shareholder loans at the beginning of 1989.  However, beginning             
          liabilities and shareholders' equity totaled $129,168.  Ending              
          liabilities and shareholders' equity for 1989 totaled $112,746.             
          We conclude that Allied did not have a contemporaneous intent to            




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