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execution,7 and there is no other evidence in the record of the
time when the notes were executed. Further, the notes provide
for interest at a rate of 9 percent, yet there is no evidence
that Simco paid John any interest. Certainly John has not
claimed that any portion of the retained proceeds that he now
seeks to characterize as a loan repayment is interest; he claims
the entire amount as nontaxable return of principal. Although
Neal and Simco’s comptroller both testified that John and Neal
typically lent their annual bonuses back to the corporation,
petitioners have not demonstrated any relationship between these
bonus amounts and the purported indebtedness of Simco to John and
Neal.8 Finally, even if Simco had any indebtedness to John, it
is indisputable that Simco lacked intent to make a loan repayment
at the time when John was secretly diverting corporate proceeds;
no one acting in behalf of the corporation had knowledge of the
diversions at that time. The loan repayment characterizations
are entirely ex post facto; although Simco’s books reflect that
7 Although the three notes for John each recite that they
were signed on “the day and year first above written”, at the top
of each document the only dates which appear are as follows:
“Effective: June 30, 1989”, “Effective: June 30, 1990”, and
“Effective: June 30, 1991”. We find that this phrasing raises an
ambiguity as to the date of execution.
8 Similarly, certain corporate minutes introduced into the
record recite salaries for John and Neal that do not bear any
discernible connection to amounts purportedly lent back to the
corporation.
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