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v. Commissioner, T.C. Memo. 1985-436. We have found that
expenses for food and rent paid by Waterfall Farms are the
Hubers’ expenses. Petitioners contend that the payments are not
constructive dividends because Mr. Huber was required to repay
any amounts that Waterfall Farms could not deduct for Federal
income tax purposes. Petitioners cite Cepeda v. Commissioner,
T.C. Memo. 1993-477, to support their position. Cepeda, however,
is inapposite. In that case, the taxpayers claimed that advances
made by the corporation were loans rather than employee
compensation or constructive dividends. Here, petitioners do not
contend that the corporate payments of the Hubers’ expenses were
loans.
For Federal income tax purposes, a transaction will be
characterized as a loan if there was “an unconditional obligation
on the part of the transferee to repay the money, and an
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 case, when the payments were made there was no
unconditional obligation on the part of the Hubers to repay a
specific dollar amount to the corporation. Their 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
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