- 17 -
shareholders and closely held corporations, formalities are often
not followed. A lack of formality does not preclude treatment of
disbursements as loans. See Miele v. Commissioner, supra at 568-
569. The absence of a note does not outweigh the behavior of
petitioner or Caspian in treating the disbursements as loans. In
addition, the fact that petitioner paid back a substantial
portion of the disbursements indicates that the lack of
collateral and the lack of a set repayment schedule did not
diminish his intent to repay.
Petitioner and Mr. Morrison understood the amounts disbursed
to be loans. Petitioner acted in a manner consistent with the
existence of a loan, as demonstrated by his payment of interest
and substantial repayment of a portion of the amounts disbursed.
Due to his salary and his history of repayment, petitioner had a
reasonable prospect of repaying the disbursements in full. Based
on the evidence in the record, we hold that the amounts disbursed
to petitioner during the years in issue were loans.6
C. Petitioner is Not Liable for Section 6662 Accuracy-Related
Penalties
Respondent assessed section 6662(a) penalties of $64,703.40
and $41,502.20 against petitioner for 1999 and 2000,
6 This finding does not include the following amounts
conceded by petitioner: (1) Capital gain of $137,880 received in
1999, and (2) additional income of $4,415.57 and $10,000 received
in 1999 and 2000, respectively.
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