Midwest Stainless, Inc. and Robert A. and Mary J. Lechner - Page 17

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            the earlier time.  When the debt was reduced in circumstances                              
            that the parties now agree did not include a repayment of the                              
            debt by Mr. Lechner, his net worth correspondingly increased.                              
            This increase in his net worth, which results from the reduction                           
            of his indebtedness to the corporation, see sec. 61(a)(12), is                             
            the economic benefit that satisfies the first prong of the                                 
            constructive dividend test.                                                                
                  Petitioners’ second argument is based on what they assert is                         
            the equivocal nature of the book entry reducing the receivable.                            
            The creation of the debt in this case, whose existence and                                 
            intention to repay at inception the parties acknowledge, was                               
            evidenced only by a journal entry on the corporate books.  We                              
            find that the subsequent reduction of the receivable by journal                            
            entry evidenced, pro tanto, the intention not to repay.                                    
                  We acknowledge that this is not an open and shut                                     
            proposition.  Accounting entries can be equivocal, as we have                              
            held numerous times in finding that accounting entries purporting                          
            to create a corporate receivable from a shareholder did not                                
            persuade us that valid debt had been created.  See, e.g., Haber                            
            v. Commissioner, 52 T.C. at 266.  Respondent has requested the                             
            Court to find that “Lechner understood that the debt had been                              
            reduced and he believed that he need not pay it”.  Petitioners’                            
            requests for findings stress that the journal entries on the                               
            corporate books of account reducing the account receivable were                            

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