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petitioner as a construction superintendent, when petitioner
obtained jobs.
Petitioner continued to advance funds to Mark Mann for
more than 10 years; i.e., until April 1992. Mark Mann made
some repayments during this period. One of these repayments
was relatively large, approximately $28,000, and represented
Mark Mann's entire after-tax bonus from a successful Government
contracting job in 1986-87. This $28,000 repaid all "interest"
accrued but unpaid as of the date of the payment, and some
"principal". However, after 1985 there was always a large
balance due petitioner.
No evidence in the record discloses whether petitioner and
Mark Mann observed the formalities of debt, when the advances
began. However, starting no later than 1982, petitioner treated
the advances to Mark Mann as loans in its internal accounting
records and on its financial statements to third parties. Also
beginning no later than 1982, petitioner reported the advances as
a loan on its tax returns. Accordingly, petitioner included the
"interest" on the advances in its taxable interest income as it
accrued, whether or not that interest was paid.2
2 Petitioner did not, however, accrue any interest on the
advances for the year in which it claims the advances became
worthless (the tax year ended July 31, 1992).
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