-46-
and profits is a factor that weighs in favor of the shareholder's
argument that the distribution was a loan. The returns filed by
INI, however, indicate that it had substantial retained earnings
in each of the years at issue from which it could have paid
dividends.26 Therefore, even if INI did not have earnings and
profits in 1990 and 1991, that factor is outweighed by all of the
other Alterman Foods factors, none of which are favorable to
petitioners.
Furthermore, with only one exception, the withdrawals from
INI were made without any of the standard indicia of
indebtedness. The one exception was the promissory note
petitioner signed for $175,000. Petitioner's attempt to change
what was initially recorded as a loan into a salary expense, and
then back into a loan, is illustrative of the game petitioner was
playing with the journal entries. After considering the facts
and circumstances, we are convinced that the promissory note for
the $175,000 represented nothing other than a strategic move in
petitioner's game.
Accordingly, respondent is sustained in the determination
that the amounts distributed to petitioner by INI in the years at
25(...continued)
profits either are not present or are inconsequential.
26 INI reported retained earnings of $528,168, $527,381, and
$523,796 in 1989, 1990, and 1991, respectively. This Court is
aware that retained earnings are not the same as accumulated
earnings and profits, see supra note 25; however, we think the
presence of substantial retained earnings is a likely indicator
that there are accumulated earnings and profits.
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