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Moreover, petitioner testified that the distribution was made
because Associates was doing well and did not need the money
distributed. A distribution of funds under such circumstances
points to an equity classification because a corporation normally
declares dividends only when it has ample cash, and shareholders
ordinarily acquiesce in such a policy due to their primary
concern for the health of an enterprise and its long-term
success. Slappey Drive Ind. Park v. United States, supra at 582.
Petitioner's statement indicates that he possessed the
motivations of a shareholder and believed it appropriate to
decide when to make payments on the same basis that corporations
customarily use to make dividend decisions. Id. Moreover,
Associates had never distributed a dividend, or paid a salary, to
petitioner prior to the distribution in issue. The foregoing
circumstances suggest that the 1981 transaction resulted in a
contribution to Associates' capital, rather than a loan. Id.
We believe that an outside lender would not have made a loan
to Associates on the terms given by petitioner. We conclude that
the characteristics of the 1981 transaction and the 1988
distribution were substantially at variance with those of a
normal debt transaction, indicating that the 1981 transaction did
not result in a loan as a matter of economic reality. Segel v.
Commissioner, supra at 833-834.
We have considered the remaining factors and circumstances
in the record, and, to the extent they are pertinent, they are
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