- 27 - taxable income until the time the settlement agreement was reached and he was no longer obligated to repay them. Respondent contends that the payments were not bona fide loans to petitioner because Winston did not intend to enforce the advances as loans. Therefore, the payments should have been included in petitioner’s income for the tax year 1993.10 Gross income is “construed broadly to reach any accession to wealth realized by a taxpayer over which the taxpayer has ‘complete dominion’”. Fla. Progress Corp. v. Commissioner, 114 T.C. 587, 598 (2000) (quoting Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955)). Generally, the proceeds of a loan do not constitute income to the borrower because the benefit is offset by an obligation to repay. See Arlen v. Commissioner, 48 T.C. 640, 648 (1967). Whether a bona fide debtor-creditor relationship exists is a question of fact to be determined upon consideration of all the pertinent facts in the case. Haber v. Commissioner, 52 T.C. 255, 266 (1969), affd. 422 F.2d 198 (5th Cir. 1970); Birnbaum v. Commissioner, T.C. Memo. 1993-485. For a disbursement to constitute a loan at the time funds are transferred, the recipient must intend to repay the proceeds and 10 Respondent maintained alternative protective positions in the notices of deficiency by determining deficiencies attributable to the $48,420 in the 1993 and 1994 tax years. Petitioner did not report the amount until the 1995 year, when the entire matter was completely settled. The parties, in their arguments on brief, frame the ultimate question in terms of whether the $48,420 is reportable in 1993 or 1995.Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Next
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