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We also note that in making adjustments to petitioner’s
consolidated income and expenses, respondent, in the notice of
deficiency, did not make any income, expense, or other adjustment
relating to the 2 to 4 days that were reflected in respondent's
notice of deficiency but that technically were not part of
petitioner’s taxable years.
We conclude that respondent's notice of deficiency is valid
and determined deficiencies for petitioner's taxable years ending
on July 1, 1990, June 30, 1991, June 28, 1992, June 27, 1993, and
July 3, 1994, and that petitioner's tax liabilities for those
years are properly before the Court.
Bad Debt Deduction
Under section 166(a)(1), bad debt deductions are allowed for
loans that become worthless within the year. Under
section 1.166-1(c), Income Tax Regs., bad debt deductions are
limited to loans that arise from genuine debtor-creditor
relationships and that are based on valid and enforceable
obligations to pay fixed or determinable sums of money.
Generally a transfer of funds by a corporation to its
shareholders may be treated as a loan if, at the time of the
transfer, the parties intended that the shareholders repay the
corporation the amount of funds transferred. Crowley v.
Commissioner, 962 F.2d 1077, 1079 (1st Cir. 1992), affg. T.C.
Memo. 1990-636; Wiese v. Commissioner, 93 F.2d 921 (8th Cir.
1938), affg. 35 B.T.A. 701 (1937); Miele v. Commissioner, 56 T.C.
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