- 19 -
l. Intent to Repay
Petitioner contends that Weiser's and Pollett's testimony
establishes that decedent intended to repay the amounts
transferred. We disagree. Weiser testified that decedent did
not tell him that she did not intend to repay the purported
loans. This does not show that decedent intended to repay the
transfers. Pollett testified that decedent told her that she
intended to repay the transfers. However, decedent had repaid
only $103,000 of the amounts transferred when she died, leaving a
claimed balance of $1,724,198. The testimony that decedent
intended to repay those funds is less persuasive than decedent's
conduct. This factor favors respondent.
3. Conclusion
Courts carefully scrutinize a taxpayer's claim that
transfers from corporations to their sole stockholders are loans.
Turner v. Commissioner, 812 F.2d 650, 654 (11th Cir. 1987), affg.
T.C. Memo. 1985-159. Petitioner argues that the notes decedent
gave to Beth W. Corp. and decedent's and Beth W. Corp.'s records
establish that the transfers were loans; however, we give less
weight to written evidence of debt, bookkeeping and financial
reporting, and the labels used by the parties when, as here, the
corporation is closely held. Fin Hay Realty Co. v. United
States, 398 F.2d 694, 697 (3d Cir. 1968); Calumet Indus., Inc. v.
Commissioner, 95 T.C. 257, 286 (1990); Jos. N. Neel Co. v.
Commissioner, 22 T.C. 1083, 1090 (1954). We give more weight to
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011