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not comply with the requirements for obtaining shareholders’
consents. See sec. 1.1362-6(b), Income Tax Regs.
Because the S corporation election was in effect for 1997
and 1998, petitioners were required to report their distributive
share of income from BP Concessions. Petitioners reported this
distributive share of income. The IRS assessment was proper.
B. Allegations of Loan to Petitioner From BP Concessions
At trial, petitioner testified that even if the S
corporation election remained in effect, the distribution of
$447,653 from BP Concessions was actually a loan to him from the
corporation. Generally, proceeds of a loan do not constitute
income to a borrower because the benefit is offset by an
obligation to repay. United States v. Rochelle, 384 F.2d 748,
751 (5th Cir. 1967); Arlen v. Commissioner, 48 T.C. 640, 648
(1967). Whether a particular transaction actually constitutes a
loan, however, is to be determined upon consideration of all the
facts. Fisher v. Commissioner, 54 T.C. 905, 909 (1970).
For a payment to constitute a loan, at the time the payments
are received the recipient must intend to repay the amounts and
the transferor must intend to enforce payment. Haag v.
Commissioner, 88 T.C. 604, 615 (1987), affd. without published
opinion 855 F.2d 855 (8th Cir. 1988); Beaver v. Commissioner, 55
T.C. 85, 91 (1970). Further, the obligation to repay must be
unconditional and not contingent on a future event. United
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