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We must determine whether payments made by EIC for the
benefit of petitioner and Mrs. Wang constitute loans, as
petitioner contends, or constructive dividends taxable under
sections 301 and 316, as respondent contends. Sections 301 and
316 provide that a distribution of property made by a corporation
with respect to its stock is a taxable dividend to the extent of
the corporation's earnings and profits. Petitioner does not
dispute that EIC had earnings and profits sufficient to support
the constructive dividends determined by respondent.
Petitioner has the burden of proving that the amounts
expended for his benefit are bona fide loans and not constructive
dividends. Rule 142(a), Welch v. Helvering, 290 U.S. 111 (1933).
Further, courts examine transactions between closely held corp-
orations and their shareholders with special scrutiny. Turner v.
Commissioner, 812 F.2d 650, 654 (11th Cir. 1987), affg. T.C.
Memo. 1985-159; Electric & Neon, Inc. v. Commissioner, 56 T.C.
1324, 1339 (1971), affd. without published opinion sub nom.
Jiminez v. Commissioner, 496 F.2d 876 (5th Cir. 1974).
Whether a distribution from a corporation to a shareholder
constitutes a dividend or a loan depends on whether, at the time
of the distribution, the shareholder intended to repay the
amounts received and the corporation intended to require repay-
ment. See Chism's Estate v. Commissioner, 322 F.2d 956, 959-960
(9th Cir. 1963), affg. Chism Ice Cream Co. v. Commissioner, T.C.
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