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in the amount of $9,000 as evidence of the existence of the
purported loans made by Mr. Henderson. Petitioner had a
corporate resolution dated December 31, 1995, which acknowledged
receipt by the corporation of alleged loans from Mr. Henderson
during 1995 totaling $18,575. Petitioner also had a similar
corporate resolution dated December 31, 1996, which acknowledged
receipt of alleged loans from Mr. Henderson in 1996 totaling
$186,800. Mr. Smith testified that petitioner maintained a loan
account titled “Loans Payable-W.R. Henderson”. He also testified
that charges were made against the loan account for “expenses, of
a personal nature, such as mortgage payment on [Mr. Henderson’s]
home, contributions to charities, credit card payments,...and
various other personal expenses.” During 1995 and 1996, the
charges against the “Loans Payable-W.R. Henderson” account
totaled $96,766 and $143,421, respectively.
Mr. Henderson was president and sole shareholder of
petitioner during the years in issue. The fact that the debtor
and creditor are related parties does not preclude the existence
of a bona fide debt. Calumet Indus., Inc. v. Commissioner, supra
at 286. However, transactions between closely held corporations
and their shareholders are examined with special scrutiny. Elec.
& Neon, Inc. v. Commissioner, 56 T.C. 1324, 1339 (1971), affd.
without published opinion 496 F.2d 876 (5th Cir. 1974).
In Smith v. Commissioner, T.C. Memo. 1995-410, payments made
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