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Associates' income tax return for the year ended September
30, 1988 (1987 corporate return), reported that its indebtedness
to shareholders decreased by $125,000 during that year.
OPINION
The principal issue presented for decision in the instant
case is whether the distribution3 petitioner received from
Associates during 1988 was a loan repayment or a dividend. If we
decide that the distribution was a dividend, and therefore
taxable income, the question of the amount received must also be
decided.
In order to ascertain the nature of the 1988 distribution,
we must decide whether, based on reliable indicia of the
intrinsic economic nature of the transaction, there was a genuine
intention that the 1981 transaction create a debtor-creditor
relationship between Associates and petitioner. Alterman Foods,
Inc. v. United States, 505 F.2d 873, 877 (5th Cir. 1974); Road
Materials, Inc. v. Commissioner, 407 F.2d 1121, 1124-1125 (4th
Cir. 1969), affg. on this issue T.C. Memo. 1967-187; Kohler-
Campbell Corp. v. United States, 298 F.2d 911, 913 (4th Cir.
1962); Litton Bus. Sys., Inc. v. Commissioner, 61 T.C. 367, 378
3 As discussed below, we consider petitioner to have received
only one distribution from Associates during 1988.
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