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4. No Collateral Secured Repayment of the Loan
The lack of collateral pledged to secure repayment is
indicative of a constructive dividend. See Crowley v.
Commissioner, supra at 1083; Roschuni v. Commissioner, supra at
1201-1202; Jones v. Commissioner, supra. Petitioner testified
that he was not asked to provide collateral, but he understood
his shares of Caspian would secure repayment. Under California
State law, a creditor can acquire an enforceable security
interest in collateral by having the debtor sign a security
agreement and deliver the certificated security to the secured
party. Cal. Com. Code secs. 8301, 9203(b) (West 2005). The
record is devoid of any evidence that petitioner signed a
security agreement or delivered his Caspian stock to Caspian.
Therefore, we find that there was no collateral, including the
Caspian stock, pledged to secure repayment. This factor weighs
in favor of finding a constructive dividend.
5. Petitioner Made Repayments of $400,000
Repayments of the amounts disbursed indicate the existence
of a loan. Crowley v. Commissioner, supra at 1083; see also
Miele v. Commissioner, supra at 568; Roschuni v. Commissioner,
supra at 1201; Weigel v. Commissioner, supra. However, to be
persuasive, the amounts of repayments in comparison to the
amounts owed must be substantial and not merely nominal. Miele
v. Commissioner, supra at 568.
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