T.C. Memo. 1997-352
UNITED STATES TAX COURT
RAYMOND K. AND MINERVA R. MASON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9998-96. Filed July 31, 1997.
Ps, shareholders of a closely held corporation,
received certain advances of funds from the corporation
in 1987 and 1988 which they used for personal and
investment expenses. The loans were not evidenced by a
note or security agreement, and no interest rate was
agreed to or set by the parties during these years. Ps
also made certain repayments on the loans in 1987 and
1988 which were reflected as reductions of principal on
the financial ledgers of both Ps and the corporation.
R determined that Ps were the recipients of below-
market loans from the corporation and, among other
things, adjusted their income to reflect distributions
pursuant to sec. 7872, I.R.C. Held: Ps have dividend
income in an amount equal to the forgone interest from
the below-market demand loans. KTA-Tator, Inc. v.
Commissioner, 108 T.C. 100, 106-107 (1997), applied.
Held, further, additions to tax under sec. 6661,
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