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“loan” to Marc and thereby was exposed to the risk of repaying
$204,222 of the Bank loan from his own pocket. Any such risk to
petitioner was illusory. In the first instance, by virtue of
Pleasant Prairie’s and Lakeview’s depositing (cumulatively) the
entire $800,000 of the Bank loan proceeds into their Bank
accounts contemporaneously with the Bank’s making the loan, there
was no significant risk that the Bank would enforce payment
against petitioner in the event of a default. Moreover, inasmuch
as petitioner wholly owned and controlled these S corporations
and their bookkeeping, they obviously were not going to act
adversely to his interests. In any event, as a result of the
December 15, 1998, merger of Marc, Lakeview, and Pleasant Prairie
into a new C corporation wholly owned by petitioner, all
purported loan obligations between petitioner and his S
corporations were extinguished; i.e., after the merger,
petitioner purportedly would have owed the new corporation
$800,000, which would have been exactly offset by the $800,000
that the new corporation purportedly would have owed petitioner.
These circumstances further denote “the inherent lack of
substance in the loans.” Oren v. Commissioner, T.C. Memo. 2002-
172.
In sum, we envision no realistic scenario in which
petitioner’s purported loan to Marc would have or could have made
him poorer. We hold and conclude that petitioner made no
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