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that Cirtex purchase his Cirtex shares after his employment with
the company terminated. Mr. Chang's accountant advised Mr. Chang
that Cirtex improperly used his $100,000 investment to pay a
dividend to existing stockholders and to purchase shares held by
some of them. Cirtex agreed to purchase from Mr. Chang the Cirtex
stock he owned. Mr. Chang received cash and a corporate note for
his Cirtex stock. Because of a lack of corporate funds, petitioner
paid Mr. Chang, in 1989, $9,100 that Cirtex owed him pursuant to
the corporate note.
Petitioners were not legally obligated to make any payments to
Mr. Chang on behalf of Cirtex. They were neither the makers nor
the guarantors of the note obligation. A corporation's business is
distinct from that of its stockholders; here, petitioners' payment
to Mr. Chang helped to discharge the obligation of Cirtex to Mr.
Chang and was in the nature of a capital contribution. Petitioners
have not shown that the payment created a bona fide debt from the
corporation to petitioners. Thus, petitioners' claim of
entitlement to a bad debt deduction with respect to the payment to
Mr. Chang is incorrect.
Petitioners claim that they advanced Cirtex $1,500 in July
1989 in order for the company to purchase 2,000 shares of its stock
held by Ba Cac Luong. The only evidence with respect to the $1,500
is a piece of paper containing a photostat of a checkbook register
and a handwritten statement "7/12/89 paid to Ba Cac Luong for
$3,500 for Cirtex--$1,500 was never reimbursed." There is no
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