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which PK Ventures had entered in connection with the purchase of
the stock of SLPC, TBPC, TPC, and TPTC; (2) the Summit Trust
loan; (3) the financing arrangements into which Rose had entered
in connection with his acquisition of control of PK Ventures
during 1990; and (4) the financing arrangements between PKVI LP
and unrelated parties.
Eighth, the labels given to the transfers from PK Ventures
to the Zephyr purchasers on PK Ventures’ audited financial
statements for the years ended December 31, 1987, December 31,
1988, and December 31, 1989, and on the Schedules L attached to
PKV&S’s consolidated income tax returns for 1987, 1988, and 1989
cannot overcome the substance of these transfers. See Estate of
Mixon v. United States, 464 F.2d at 403-404; cf. Gregory v.
Helvering, 293 U.S. 465, 468-470 (1935). Based upon our analysis
of the relevant factors, we conclude that these transfers were,
in substance, distributions of property from PK Ventures to its
shareholders.
Because the transfers from PK Ventures to the Zephyr
purchasers were not bona fide loans, we need not decide questions
of worthlessness and timing. See sec. 1.166-1(c), Income Tax
Regs. (“Only a bona fide debt qualifies for purposes of section
166.”). Accordingly, we sustain respondent’s determination that
PKV&S is not entitled to bad debt deductions of $600,000 and
$400,000 on its consolidated income tax returns for 1990 and
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