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to invest in the S corporation. The Court found that the S
corporation recorded the funds received as a loan from the
shareholder and that the disbursing C corporation reported the
funds disbursed as a loan to the shareholder.
Here, each of the disputed transactions involved a third
party providing funds to Ram. In order to determine whether any
of these transactions increased Jerry’s basis in Ram, we examine
each transaction individually.
1995 Disputed Items
The November Inter-Con Payment
Inter-Con is a C corporation that is wholly owned by Jerry.
The record does not disclose credible evidence that supports a
finding that the $60,000 Ram received was a loan from Jerry. In
fact, Inter-Con’s 1995 trial balance records a $60,000 receivable
from Ram and shows no evidence of any loans to shareholders.4
Petitioners rely, in part, on a $60,000 promissory note
purportedly executed by Ram in favor of Jerry on November 11,
1995, to support a proposed finding that the November Inter-Con
payment created a direct indebtedness to Jerry. We give no
weight to this note. It predates the November 16, 1995,
4 The general ledgers of TSI and Inter-Con for the relevant
years were not introduced into evidence. Petitioners’ failure to
introduce these records into evidence leads us to conclude that
the records would have treated the disputed transactions as
intercompany loans rather than as loans from Jerry. Wichita
Terminal Elevator Co. v. Commissioner, 6 T.C. 1158 (1946), affd.
162 F.2d 513 (10th Cir. 1947).
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