Rodney Noble and Jo Marie Payton - Page 9

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               A thinly capitalized corporation is strong evidence that               
          loans are not bona fide debt.  This is especially true where a              
          very high debt-to-equity ratio exists.  Gyro Engg. Corp. v.                 
          United States, supra at 439.  Here, the capitalization of PPP was           
          at a debt-to-equity ratio of more than 600 to 1, a ratio which              
          does not support the existence of loans as distinguished from               
          capital contributions by petitioner to PPP.                                 
               Petitioner relies on a corporate resolution adopted in                 
          January 1996, which attempts to recharacterize any corporate                
          deductions not allowed by the Commissioner as loan repayments.              
          For a corporate resolution to be determinative for Federal income           
          tax purposes, the company’s actions must comport with the                   
          resolution.  See Turner v. Commissioner, supra at 654.  There               
          are, however, no bookkeeping entries which indicate that the                
          amounts at issue were intended as loan repayments.  Also, the               
          corporate records do not indicate that these payments were                  
          repayments of loans.  The board’s attempt to recharacterize the             
          payments made in 1995 and 1996 was not reflected in the substance           
          of any transaction.  By all indications, there is no expression             
          of any intent on the part of petitioners to lend money to PPP or            
          any obligation on the part of PPP to repay any purported loans.             
          See Elec. & Neon, Inc. v. Commissioner, supra.                              
               Essentially, there are only two indicia of a loan,                     
          petitioner’s statements indicating her intentions, and PPP’s                






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