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operations. Mayflower owned 100 percent of Sabinas Claims
Service, Inc., and 100 percent of Texas Premium Finance.
During the years in issue, petitioner owned 100 percent of
Jordan General Insurance Agency, Inc. (Jordan), an S corporation,
and was involved in a number of other insurance-related
enterprises in which he held ownership interests. During the
years in issue, each of petitioners received wages from one or
more of the insurance-related enterprises.
Advances to Petitioner
During 1986 and 1987, petitioner received advances of
$1,175,044 and $1,469,974.40 from Mayflower. During 1988,
petitioner received advances of $329,266.66 from Jordan.
Petitioner executed promissory notes in the amount of the
advances. None of the amounts advanced were ever repaid. The
advances were shown on Mayflower’s 1987 U.S. Corporation Income
Tax Return, Form 1120, as “loans to stockholders”. The amounts
were not reflected as outstanding at the end of 1988 on
Mayflower’s corporate tax return for that year, and no loans to
stockholders were shown on Jordan’s corporate tax return for
1988.
In December 1989, Mayflower and Jordan each filed petitions
in bankruptcy. The amounts that were advanced to petitioner were
not shown as property of Mayflower or Jordan in the schedules
filed in the bankruptcy proceeding.
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