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corporation lent petitioner $50,000 during 1989. Accordingly, we
find that petitioner has failed to prove that the $50,000 was not
a loan.
Respondent determined that petitioner realized income during
1994 from the cancellation of indebtedness. In support of that
position, respondent relies on the running of the period of
limitations for enforcement of the note and the elimination of
the note from the Schedules L of the corporation and the three
spinoff corporations. Petitioner did not submit any proof in
support of her position that the Pattersons forgave $10,000 of
the note each year for 5 years, resulting in the note’s being
paid in full by the end of 1993.
Although not controlling, the running of the period of
limitations on the time within which the corporation could have
commenced an action against petitioner to recover the debt
supports respondent’s position. See Miller Trust v.
Commissioner, 76 T.C. at 195. Additional support for
respondent’s determination is found in the manner in which the
corporation handled the note on its 1994 return. The corporation
included the $50,000 note as an asset at the beginning of 1994 on
Schedule L. However, neither the corporation nor any of the
three spinoff corporations included the note on its tax return as
an asset at yearend 1994.
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