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697 (3d Cir. 1968). No single factor is controlling. Dixie
Dairies Corp. v. Commissioner, supra at 493.
Petitioners argue that all of the funds that petitioners
transferred to Auto Plaza constituted bona fide business loans
that became worthless and therefore the bad debts qualify for a
business bad debt deduction under section 166. Respondent argues
that petitioners’ transfers of funds to Auto Plaza should be
treated as capital contributions and, thus, petitioners should
not be allowed to claim a bad debt deduction under section 166.
When petitioners made the transfers to Auto Plaza, no loan
agreements or promissory notes were drafted or executed. The
absence of notes or other instruments favors respondent. See
Calumet Indus., Inc. v. Commissioner, supra at 286.
Petitioners argue that the transfers were recorded as “loans
from shareholders” on the corporation’s books and records.
Transfers to closely held corporations by controlling
shareholders are subject to heightened scrutiny, and labels
attached to such transfers by the controlling shareholders
through bookkeeping entries or testimony have limited
significance unless these labels are supported by objective
evidence. Fin Hay Realty Co. v. United States, supra at 697;
Dixie Dairies Corp. v. Commissioner, supra at 495. Here,
petitioners were the majority shareholders of the corporation
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