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2. Petitioner Paid $48,344.76 in Interest
The payment of interest indicates the existence of a loan.
Crowley v. Commissioner, 962 F.2d 1077 (1st Cir. 1992), affg.
T.C. Memo. 1990-636; see also Roschuni v. Commissioner, supra at
1201-1202; Jones v. Commissioner, supra.
At trial, Mr. Rolling testified that an interest rate of 6.2
percent was charged. On the other hand, petitioner testified
that he was uncertain as to the percentage, but he believed the
An interest rate was prime plus one. Respondent argues that the
contradictory testimony of Mr. Rolling and petitioner casts doubt
on whether interest was charged. However, petitioner, Mr.
Rolling, and Mr. Morrison all credibly testified that they knew
interest was being charged. In addition, petitioner paid
$48,344.76 in interest on December 29, 2000. While there may
have been some confusion as to the rate of interest, the stated
intent of the parties and the actual payment of interest weighs
in favor of finding a loan.
3. There Was No Fixed Schedule for Repayment
The lack of a fixed schedule for repayment is indicative of
a constructive dividend. See Crowley v. Commissioner, supra;
Roschuni v. Commissioner, supra at 1201; Jones v. Commissioner,
supra. Petitioner testified at trial that there was no fixed
schedule for repayment. This factor weighs in favor of finding a
constructive dividend.
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