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1987); Bauer v. Commissioner, 748 F.2d 1365, 1368 (9th Cir.
1984), revg. T.C. Memo. 1983-120; A.R. Lantz Co. v. United
States, 424 F.2d 1330, 1333 (9th Cir. 1970); O.H. Kruse Grain &
Milling v. Commissioner, 279 F.2d 123, 125-126 (9th Cir. 1960),
affg. T.C. Memo. 1959-110.
Because the control element suggests the opportunity to
contrive a fictional debt, transfers of funds between related
corporations are subject to particular scrutiny. In re Uneco,
Inc., 532 F.2d 1204, 1207 (8th Cir. 1976). Transfers of funds
between closely held corporations and shareholders are often
characterized by informality, but in order to qualify for loan
treatment in such situations the transfer of large amounts of
funds generally should have some formal indicia of a loan. Lewis
v. Commissioner, T.C. Memo. 1985-563.
Where transfers of funds were made from a subsidiary
corporation to a parent corporation through a centralized
accounting system and where customary indicia of loans were not
present, the transfers were treated as constructive dividends and
not as loans. Alterman Foods, Inc. v. United States, supra.
Petitioner argues that the shareholders of Peoplefeeders
intended for Peoplefeeders to repay Square Pan the $3,751,930
difference between Peoplefeeders’ total cash receipts transferred
into the Intercompany bank account and the total expenses and
loan payments paid on behalf of Peoplefeeders out of the
Intercompany bank account and that the use of funds in the
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