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unconditional intention on the part of the transferor to secure
repayment.” Haag v. Commissioner, 88 T.C. 604, 616 (1987), affd.
without published opinion 855 F.2d 855 (8th Cir. 1988). In the
instant cases, when the payments were made there was no
unconditional obligation on the part of Mr. Tschetter to repay a
specific dollar amount to the corporation. His obligation to
repay any of the payments was in general terms. The amount of
repayment could not be determined when the payments were made.
Any obligation to repay any amount could not arise before
respondent disallowed the deduction for the expenses; i.e, when
the Wolf Creek Farm notice of deficiency was issued in January
2001. Thus, the payments were not loans. Since the payments
when made by Wolf Creek Farm did not constitute business expenses
of the corporation or loans to Mr. Tschetter, the conclusion is
inescapable that the payments constituted distributions by Wolf
Creek Farm to Mr. Tschetter.
In N. Am. Oil Consol. v. Burnett, 286 U.S. 417, 424 (1932),
the Supreme Court stated:
If a taxpayer receives earnings under a claim of right
and without restriction as to its disposition, he has
received income which he is required to return, even
though it may still be claimed that he is not entitled
to retain the money, and even though he may still be
adjudged liable to restore its equivalent. * * *
It is clear, therefore, under the claim of right doctrine, the
amounts paid by Wolf Creek Farm in 1995, 1996, and 1997 were
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