Nariman Teymourian - Page 15

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               During the years in issue, Caspian made disbursements to or            
          on behalf of petitioner in amounts totaling $1,570,334.58.                  
          Caspian reflected the disbursements on its books as either                  
          advances, officer’s receivables, or notes.  On December 29, 2000,           
          petitioner repaid a total of $448,344.76, of which $400,000 was             
          applied to reduce the balance of the notes receivable accounts.             
          Petitioner’s repayment of slightly more than 25 percent of the              
          total disbursements was substantial and not merely nominal.  This           
          factor weighs in favor of finding a loan.                                   
               6.  Petitioner Had a Reasonable Prospect of Repayment                  
               A reasonable prospect of repayment indicates the existence             
          of a loan.  See Welch v. Commissioner, 204 F.3d 1228, 1231 (9th             
          Cir. 2000).  A taxpayer’s insolvency or financial difficulty                
          casts doubt on the ability to repay and thus on the                         
          characterization of a disbursement as a loan.  See id.                      
               Petitioner and his wife reported adjusted gross income of              
          $233,097 and $797,682 for 1999 and 2000 respectively.  On                   
          December 29, 2000, petitioner repaid $400,000, leaving                      
          $1,170,334.58 outstanding.  Given petitioner’s income and history           
          of repayment, petitioner had a reasonable prospect of repaying              
          the remainder of the disbursements.  This factor weighs in favor            
          of finding a loan.                                                          
               7.  The Parties Involved Treated the Disbursements as Loans            
               The conduct of the parties may indicate the existence of a             

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