Norton M. Bowman - Page 12

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          Petitioner testified that he was Associates' sole stockholder and           
          that his control of the corporation was such that he could have             
          caused it to make a distribution "repaying" his "loan" at any               
          time.  We conclude from petitioner's testimony that he relied on            
          his control of Associates as a stockholder to protect his                   
          interests, rather than his status as a creditor, which indicates            
          that the 1981 transaction effected a contribution to Associates'            
          capital.  Charter Wire, Inc. v. United States, 309 F.2d 878, 881            
          (7th Cir. 1962).                                                            
               Additionally, the note did not provide for payment of                  
          interest with respect to petitioner's "loan", even though, at the           
          time of the 1981 transaction, interest rates ranged between 18              
          and 19 percent, nor does the record suggest that a payment of               
          interest ever occurred.  Petitioner's apparent indifference to              
          the receipt of interest suggests that he is not a true lender but           
          is principally concerned with the future earnings of Associates             
          or its increased market value.  Slappey Drive Ind. Park v. United           
          States, 561 F.2d at 582; Segel v. Commissioner, supra at 833.               
               The timing of the 1988 distribution also indicates that the            
          1981 transaction effected a contribution to Associates' capital             
          rather than a loan.  That distribution did not occur until more             
          than 7 years after the 1981 transaction, and nothing in the                 
          record suggests that Associates similarly delayed payments of its           
          bona fide debts.  O.H. Kruse Grain & Milling v. Commissioner, 279           
          F.2d 123, 126 (9th Cir. 1960), affg. T.C. Memo. 1959-110.                   




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