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made by Mr. Noble, the accountant for Stainless and Mr. Lechner,
“consistent with Mr. Noble’s handling of similar items in his
practice for the last thirty (30) years and was consistent with
standard and accepted accounting practice”. Mr. Lechner disputes
the irrevocability of the reduction of the receivable, relying on
Mr. Noble’s testimony that if the Court upholds Mr. Lechner’s
position, the debt will be restored on the corporate books by an
adjusting entry.
We have concluded that Mr. Lechner’s state of mind, whatever
it may been, is not determinative. A case such as this should be
decided by recourse to objective facts and circumstances, see
Dean v. Commissioner, 57 T.C. 32, 43-44 (1971), with due regard
for the desirability of consistency in the dealings between
shareholders and the closely held corporations that they control.
We are not persuaded by Mr. Noble’s testimony--that the
receivable will be adjusted upward if the Court upholds
Mr. Lechner’s position--that the reduction of the receivable on
the corporate books was not a corporate dividend distribution to
Mr. Lechner. Mr Noble’s testimony flies in the face of the
parties’ stipulation that the book entry reducing the receivable
reduced the debt.7
7 Petitioners’ offer, embodied in Mr. Noble’s testimony,
which petitioners adopted on brief, seems counterintuitive. One
would think that if the Court were to hold that the debt
(continued...)
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