- 16 -
distributing corporation’s earnings and profits under
section 301.
H. Conf. Rept. 98-861, supra at 1013, 1984-3 C.B. (Vol. 2) at
267.
Petitioner’s quotation from the House report is not
compelling because it is taken out of context and appears to be
an example of the application of section 7872 in a corporate
setting involving a demand note. The above-quoted House report
language is not designed to limit the application of section 7872
to situations involving controlling shareholders. The reference
to “a controlling shareholder” may also relate to the
corresponding “dividend” mentioned later in the quoted sentence.
More importantly, the statutory language “any shareholder” is
clear, without limitation, and unambiguous, and there is no need
to seek out the legislative intent in the underlying legislative
history. The portion of the legislative history relied on by
petitioner is also far from being directly on point or probative
in support of petitioner’s position. Accordingly, we hold that
section 7872 may apply to a loan to a majority or a minority
shareholder.
Petitioner’s Indirect Loan Argument--We next consider
petitioner’s arguments that section 7872 should not apply to the
“indirect loan” situations. Petitioner declares that 7 of the 10
loans in question were “indirect” (not made directly to
shareholders) and do not come within the purview of section 7872.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011