- 5 -
intent has been demonstrated is a factual question to be decided
on the basis of the particular facts and circumstances of the
case. Id.; Electric & Neon, Inc. v. Commissioner, supra at 1340.
Before November 1, 1991, petitioner was entitled to a
monthly salary from HIEI. According to petitioner, in lieu of
this salary, the corporation agreed to provide him with enough
money to cover his living expenses. From January to May 1992,
the corporation distributed on average approximately $3,350 per
month to petitioner. From May to September 1992, the corporation
distributed approximately $2,738 per month to petitioner.
While receiving these payments, petitioner continued to
perform the same professional services for the corporation as he
had before November 1, 1991. Petitioner used the money to
sustain himself and his family until the corporation recovered
financially. If ever the corporation reached stable financial
ground, petitioner testified that he expected HIEI to fulfill its
salary obligation to him and collect repayment of the "loans".
Petitioner knew, however, that HIEI was financially
insecure. In fact, the corporation was insolvent at the time the
distributions were made. Some of the distributions, $10,950,
were made after the corporation had terminated its operations.
It seems apparent, therefore, that whether HIEI would ever regain
financial stability sufficient to resume paying petitioner's
salary was questionable at best. Thus, when the distributions
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011