- 9 -
of the facts and circumstances of the case. Chism's Estate v.
Commissioner, supra at 960. Petitioners bear the burden of
proving that the advances were bona fide loans. Welch v.
Helvering, 290 U.S. 111, 115 (1933). After considering all of
the facts and circumstances, we conclude that the advances were
constructive dividends to Messrs. McCurley and Hall.
Several factors support our conclusion. First, SDI never
paid formal dividends to its shareholders. Second, petitioners
did not establish that SDI demanded, or that Messrs. McCurley or
Hall volunteered, repayment of the advances. See Georgiou v.
Commissioner, T.C. Memo. 1995-546 (stating that the failure to
repay a steadily increasing loan balance is indicative of
constructive dividends); Baird v. Commissioner, T.C. Memo. 1982-
220 (same). Third, the advances did not bear interest. Fourth,
the advances to Messrs. McCurley and Hall were expressly made
with reference to their redemption accounts (i.e., their share of
SDI's profits). Fifth, the advances were not repayable at a
fixed maturity date, but rather were repayable on demand. Sixth,
out of more than 70 advances made to shareholders, SDI demanded
repayment of only two. Moreover, the repayments were demanded
solely because the respective shareholder's advances exceeded 75
percent of his redemption account.
In essence, SDI was designed and intended to capture each
shareholder's insurance-related profits and to provide the
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