-24-
accordance with this holding, will be necessary to determine the
net amounts of the distributions.
Finally, in 1991 Development went out of business. We have
decided that petitioner's withdrawals were disguised
distributions, not loans, and that petitioner's payments in
excess of withdrawals, if any, actually were contributions to
capital. Therefore, at the time of the corporate dissolution in
1991, the ending balance in the loan account was the same as the
beginning balance in 1989, $427,368, plus accrued interest on
this amount. Accordingly, we find that upon dissolution
petitioner received a distribution in the amount of that
indebtedness. See sec. 1.301-1(m), Income Tax Regs.
Assumption of Development's Indebtedness to INI
Respondent determined that petitioner did not assume
Development's indebtedness to INI in 1990. Petitioner asserts
that he validly assumed Development's indebtedness to INI in
1990, such that Development owed petitioner $417,978, and
petitioner owed INI the same amount.17
Morrisett testified that Ricks and he made journal entries
transferring Development's indebtedness to petitioner because
17 In determining petitioners' deficiencies for 1989, 1990, and
1991, respondent disallowed all of the debt transfers and
assumptions, whether transferred between corporations or between
petitioner and a corporation. Petitioner asserts that all of the
transfers and assumptions are valid. Our analysis and conclusion
regarding the transfer of the $417,978 is equally applicable to
the other debt transfers and assumptions disallowed by
respondent.
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