PK Ventures, Inc. and Subsidiaries, et al. - Page 17

                                       - 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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