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2001-280, and Culnen v. Commissioner, T.C. Memo. 2000-139, that
attempt was successful. Petitioners argue that their
circumstances are controlled by Yates and Culnen.
Petitioners’ argument that the Paulan direct payments
constituted bona fide back-to-back loans through them
individually is essentially premised on two grounds: (1) Like
the taxpayers in Yates and Culnen they have historically used
Paulan as an “incorporated pocketbook”, to discharge their
personal obligations, and the advances to Sidal are merely
another example of that practice; and (2) after respondent’s
denial of shareholder basis for Paulan’s pre-1997 advances to
Sidal, petitioners, at Michel’s direction, structured all
subsequent Paulan advances to Sidal in a manner intended to
constitute bona fide back-to-back loans, an intent that was
clearly manifested by the promissory notes, the minutes, and the
accounting for those advances by Paulan and Sidal. We shall
consider those grounds in turn.
(2) Status of Paulan as an “Incorporated Pocketbook”
In Yates v. Commissioner, supra, over a 4-year period, the
taxpayers wrote 409 checks on the payor corporation’s account
totaling $1,831,156 for various personal expenses and, at the
taxpayer husband’s direction, the payor corporation’s personnel
wrote 113 checks totaling $2,231,248 “to or for the * * *
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