- 106 -
572, 581 (5th Cir. 1977)). When the transferee or transferor is
in substantial control of the business, such control invites a
special scrutiny of the situation. See Haber v. Commissioner,
supra at 266; Roschuni v. Commissioner, supra at 1202; see also
Tulia Feedlot, Inc. v. United States, 513 F.2d 800, 805 (5th Cir.
1975). We have applied these principles when analyzing transfers
between two closely held businesses that share a common ownership
but are otherwise unrelated. See, e.g., Stinnett’s Pontiac
Serv., Inc. v. Commissioner, T.C. Memo. 1982-314, affd. 730 F.2d
634 (11th Cir. 1984); see also Marcy v. Commissioner, T.C. Memo.
1994-534.
Petitioners contend that the facts and circumstances of
these cases establish that transfers from PK Ventures to the
Zephyr purchasers were bona fide loans. Furthermore, petitioners
contend that these alleged debts became worthless during the
years in which PKV&S claimed bad debt deductions on its
consolidated income tax returns. Conversely, respondent contends
that the facts and circumstances of these cases establish that
the transfers were not bona fide loans. Respondent also contends
that, in any event, none of these alleged debts became worthless
during the years in which PKV&S claimed bad debt deductions on
its consolidated income tax returns. We consider these
contentions below.
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