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back-to-back loans, thereby increasing their bases in the S
corporation. Id.
Concerning the direct checks, we noted the interest payments
by the S corporation as a factor weighing against the taxpayers’
attempts to reclassify the advances as back-to-back loans. Id.
In contrast, as to the wire transfers, we declined to consider
the interest payments fatal when the form of the transactions was
otherwise in accordance with the substance advocated by the
taxpayers. Id. The evidence was insufficient to overcome the
form of the wire transfers and show that the taxpayers were not
the intended borrowers but were merely conduits to funnel funds
between the entities. Id. We further observed that although the
back-to-back structure was adopted for the purpose of achieving
tax bases, such was a permissible motivation where there was a
business purpose (i.e., to provide working capital for the
corporation) for the loans. Id.
Likewise, the Court concludes here that the evidence in the
record on balance weighs in favor of the $6 million having been
structured in form as a loan to Mr. Gleason. Moreover, the
evidence allegedly supporting a contrary substance is lacking in
probative heft. Given the surrounding circumstances and
particularly the abrupt implosion of the LBO, nothing proffered
convinces the Court that those involved did not intend at the
time the funds were advanced to operate in accordance with the
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