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from his corporation when it is insolvent is taxable on the
portion of the funds that he keeps for his own purposes but not
on the portion that is returned to the corporation or its
creditors before yearend. A difficult issue in this case is
whether the transfer of funds into accounts subject to the TRO
constitutes a repayment to the corporation within the meaning of
the foregoing authorities.
Respondent’s position is that it does not. Respondent
argues that petitioner maintained dominion and control over the
funds after their transfer into the ANB accounts. Respondent
cites several factors: The ANB accounts were maintained in
petitioner’s name and Social Security number with
petitioner’s attorney as trustee; petitioner reported the
interest earned on ANB account funds in 1988 on his return and
received backup withholding credits in certain years;
disbursements were made from the ANB accounts to pay personal
expenses of petitioner; petitioner refused Northwest’s repeated
requests that funds in the ANB accounts be released to Northwest
in payment of his corporations’ acknowledged indebtedness; the
ANB accounts were used as security for petitioner’s attorney’s
fees and were used to negotiate and settle petitioner’s personal
liability to Northwest.
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