J. Michael Joly and Bonnie B. Joly, Jody Steven Joly, and David Andrew Joly - Page 6

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               These amounts differ slightly from the amounts determined in           
          the statutory notices of deficiency.  The amounts listed as paid            
          by the corporation to or on behalf of Michael include amounts               
          paid by it to or on behalf of Bonnie, James, and Adam and to or             
          on behalf of Jody and David for the taxable years during which              
          Jody and David were not shareholders.  We have considered and               
          reject petitioners' arguments that portions of these amounts                
          constitute loans from the corporation to the shareholders and/or            
          family members.  No loan documents or other records showing the             
          existence or amounts of the alleged loans were presented at                 
          trial, and the corporation's Forms 1120S for 1992, 1993, and 1994           
          do not show any loans on the Schedules L (balance sheets).                  
          Accordingly, the amounts listed above shall be used in the Rule             
          155 computation.                                                            
               Michael ceased to operate in the corporate form and resumed            
          designing and building homes as a sole proprietor shortly after             
          respondent's examination of petitioners' and the corporation's              
          tax returns for 1992, 1993, and 1994.                                       
               The first issue for decision is whether any portions of the            
          amounts paid to or on behalf of Michael and Jody constitute                 
          employee wages.  Respondent's determinations in the statutory               
          notices of deficiency are presumed to be correct, and petitioners           
          bear the burden of proving otherwise.  Rule 142(a); Welch v.                
          Helvering, 290 U.S. 111, 115 (1933).                                        






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