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Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965); sec.
1.6001-1(a), Income Tax Regs. Moreover, a taxpayer who claims a
deduction bears the burden of substantiating the amount and
purpose of the item claimed. Hradesky v. Commissioner, 65 T.C.
87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976);
sec. 1.6001-1(a), Income Tax Regs.
Characterization of an advance as either a loan (i.e., debt
owed to the lender) or capital contribution (i.e., equity held by
the contributor in the entity) is a question of fact which must
be answered by reference to all of the evidence, with the burden
on the taxpayer to establish that the alleged loans were bona
fide debt. Rule 142(a); Dixie Dairies Corp. v. Commissioner, 74
T.C. 476, 493 (1980); Yale Avenue Corp. v. Commissioner, 58 T.C.
1062, 1073-1074 (1972). The taxpayer's assertion that an advance
was a loan is not determinative of the issue of characterizing an
advance as debt or equity. See In re Uneco, Inc., supra.
Advances to a closely held corporation by its shareholders are
subject to particular scrutiny, as "The absence of arm's-length
dealing provides the opportunity to contrive a fictional debt
shielding the real essence of the transaction and obtaining
benefits unintended by the statute." Gilboy v. Commissioner,
T.C. Memo. 1978-114.
In the instant case, the record consists of only the notice
of deficiency and copies of petitioners' 1989 return, 1989
amended return, and 1990 return. Petitioners provided no books,
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