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sec. 1.482-2(a)(1), Income Tax Regs. Nonetheless, we agree with
respondent that the promissory notes are entitled to little or no
weight in our consideration of whether the back-to-back loans
claimed by petitioners actually existed.
Neither petitioner could recall the actual dates upon which
the promissory notes were executed. They could only agree that
the notes were executed sometime between 1997 and 2000. We infer
from that testimony that the notes were not executed
contemporaneously with the wire transfer and the Paulan direct
payments but were, instead, backdated to appear contemporaneous
with those payments. Moreover, none of the eight sets of
promissory notes bears an effective date that corresponds to the
Paulan direct payment to which it relates.
Five sets of notes bear effective dates that are between 3
days and more than 9 months subsequent to the corresponding
Paulan direct payments. Even if we were to accept as accurate
the stated effective dates of those notes, the notes are more
reflective of attempts to recharacterize prior debts from Sidal
to Paulan as back-to-back loans through petitioners than they are
of back-to-back loans as of the dates of the actual Paulan direct
payments. Therefore, at best, those notes suggest the creation
of a back-to-back loan structure after the Paulan direct payments
to which they relate. Such a finding would not justify treatment
of those notes as anything more than guaranties of Sidal’s
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