- 15 - out by the Supreme Court in Commissioner v. Indianapolis Power & Light Co., 493 U.S. 203, 209 (1990), the borrower frequently has unfettered use of the proceeds of a loan. The Supreme Court explained that the key to determining whether a taxpayer enjoys “complete dominion” over a given sum is not whether the taxpayer has unconstrained use of the funds during some period, but whether the taxpayer “has some guarantee that he will be allowed to keep the money.” Id. at 210. In evaluating whether a taxpayer enjoys complete dominion, we look to “the parties’ rights and obligations at the time the payments are made.” Id. at 211. Here, petitioner’s dominion over the Amoco payment is far less complete than is ordinarily the case in an advance-payment situation. At the time Amoco made the advance, petitioner had no guarantee that it would be allowed to keep any portion of the payment. Highland Farms, Inc. v. Commissioner, 106 T.C. 237, 250-252 (1996). Respondent asserts that the advance was not a loan because formalities for creating a loan were not followed, the mortgage was subordinated to an unknown debt, and Amoco did not consider petitioner’s financial condition before making the advance. Specifically, respondent asserts that the fact that Mr. Zimmerman’s signature on the note does not indicate that he signed as petitioner’s president means that he signed the note in his individual capacity, making him the borrower. We disagree.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011