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Lily received a $314,912 distribution from the First Pacific
account in October 1988. Shin's records do not show an inflow
from a shareholder at that time that would indicate that Lily
repaid this amount to Shin. Shin's chief accountant, Ken Chen,
who was responsible for Shin's muddled recording system, could
not identify the recorded inflows that would reflect Lily's
repayment even though Ken Chen claimed it was his duty to ensure
borrowers repaid the alleged loans. We find that Lily did not
repay this amount to Shin.
At trial, petitioner husband claimed that he did not
question the reasons for the withdrawals, nor did he care who
received the funds. We find it hard to believe that a 30-percent
shareholder would not care who was receiving the profits from his
company. This is especially so given the fact that petitioner
husband never received a dividend from Shin while other
shareholders with smaller shareholdings were receiving dividends.
Lily was less than a 3-percent shareholder but was receiving
substantial advances from Shin that were not repaid. Lily
generally held the passbooks from the Coast and First Pacific
accounts and never showed them to anyone at Shin. Lily used the
money from the accounts to pay the money she owed under the 1986
Agreement. In addition, the accounts were first opened when the
1986 Agreement was entered into and closed when Lily finished
making the payments due under that Agreement. A distribution to
a family member of the shareholder can constitute a sufficient
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