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of embezzlement. The taxpayer's assertion is that the
loan amounts outstanding are due to the corporation and
not to him personally and therefore is not including
the balance due of $318,000 in his taxable income.
On his income tax return for 1991, petitioner attached a
disclosure statement which said:
2. The taxpayer made unauthorized loans from
Activewear, Inc. in the amount of $958,880 less
repayments of $832,786 = $126,094 balance due. The
corporation is pursuing the taxpayer with charges of
embezzlement. The taxpayer's assertion is that the
loan amounts outstanding are due to the corporation and
not to him personally and therefore he is not including
the balance due of $126,094 in taxable income.
Respondent determined that the $318,000 in 1990 and $126,094
in 1991 was income to petitioner. Respondent also determined
that petitioner filed his 1990 income tax return late.
OPINION
A. Positions of the Parties
Respondent contends that petitioner misappropriated funds by
writing unauthorized checks from Activewear to Jackson's
corporations in 1990 and 1991. Alternatively, respondent
contends that the unpaid balances were constructive dividends
paid by Activewear to petitioner. Thus, respondent contends that
the unpaid loan balances of $318,000 in 1990 and $126,094 in 1991
to Jackson's corporations are income to petitioner. Respondent
also contends that the security interests Jackson gave to
petitioner for the Activewear loans were income to petitioner.
Petitioner contends that the unpaid amounts were not income
to him because the transfers were bona fide business loans from
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