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Year Seiyo Taiyo Development
1989 $5,000,000 $3,604,746
1990 191,755 ---
1991 2,194,378 ---
The advances were not evidenced by promissory notes, had no fixed
maturity date, and were unsecured. The advances were not repaid
during the years in issue. During the years 1993 and 1994,
petitioner repaid approximately $5 million and $400,000 of the
related party debt, respectively. There was no stated rate of
interest, and no interest was paid by petitioner on the advances.
Seiyo and Taiyo Development did not demand payment or take legal
action against petitioner regarding the advances.
At the end of the 1990 and 1991 fiscal years, petitioner's
outstanding liabilities (including advances from Seiyo and Taiyo
Development, bank indebtedness, and miscellaneous liabilities)
and the tax basis of its assets were as follows:
Fiscal
Year Ended Outstanding Total Tax Basis
Sept. 30 Liabilities of Assets
1990 $27,680,245 $20,858,967
1991 21,955,602 16,907,976
As of September 30, 1995, the outstanding advances (including
principal and accrued interest) totaled $23,875,036.82.
On its Federal income tax returns, petitioner generally
reported that it was engaged in real estate development and
property investment and real estate investment and development.
On its 1989, 1990, and 1991 tax returns, petitioner reported
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