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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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