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Given petitioner’s credible and persuasive explanation of
the loan application, we find that peitioner has met his burden
of proof. Based on the above, we hold that petitioner did not
receive rental income during the years in issue and is thus not
liable for any income tax deficiencies relating to rental income.
B. Respondent Improperly Recharacterized Petitioner’s Loans as
Constructive Dividends
Respondent determined that disbursements made by Caspian to
and on behalf of petitioner during the years in issue were
constructive dividends and not loans. The resolution of this
issue does not depend on which party bears the burden of proof.
On the basis of the evidence in the record, we hold that the
amounts disbursed to petitioner were loans.
Whether a corporation’s disbursements to an employee-
shareholder are loans or constructive dividends depends on
whether, at the time of the disbursements, the employee-
shareholder intended to repay the amounts received and the
corporation intended to require payment. J.A. Tobin Constr. Co.
v. Commissioner, 85 T.C. 1005, 1022 (1985); Elec. & Neon, Inc. v.
Commissioner, 56 T.C. 1324, 1338-1339 (1971), affd. without
published opinion 496 F.2d 876 (5th Cir. 1975); Miele v.
Commissioner, 56 T.C. 556, 567 (1971), affd. without published
opinion 474 F.2d 1338 (3d Cir. 1975). If repayment was intended
at the time of disbursement, the amounts are generally considered
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