- 16 - loan. Morrison v. Commissioner, T.C. Memo. 2005-53; see Welch v. Commissioner, supra at 1230; Baird v. Commissioner, 25 T.C. 387, 395 (1955). Petitioner credibly testified that, at the time the disbursements were made, he intended the disbursements to be loans, he believed that interest would be charged, and he understood that he would have to repay the amounts disbursed. During 2000, petitioner paid $48,344.76 in interest and repaid $400,000 of the disbursements. Mr. Morrison, the minority shareholder of Caspian, credibly testified that he understood the amounts disbursed to petitioner were loans, and he expected petitioner to repay the loans together with interest. In addition, Caspian reported petitioner’s $48,344.76 payment as interest income on its 2000 income tax return. Caspian treated the disbursements to petitioner as notes receivable, indicating Caspian’s expectation that the amounts would be repaid. The behavior of the parties weighs heavily in favor of finding a loan. Summary While three of the seven factors weigh in favor of finding a constructive dividend, we find those factors to be less persuasive in the present case. In transactions betweenPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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