Opinion ID: 525066
Heading Depth: 2
Heading Rank: 1

Heading: MCA Transactions

Text: 3 In June 1984, MCA gave Pisello $30,000 to investigate the feasibility of establishing a Latin record label. Several factors make this payment look like a loan. The parties allegedly agreed that Pisello would return the money if MCA did not accept a proposal from him, MCA carried the payment on its books as an account receivable, and when Pisello failed to repay the money, the company wrote the sum off as a bad debt. On the other hand, MCA and Pisello did not document the transaction in any way and MCA issued Pisello a Form 1099 for reporting the payment to the Internal Revenue Service (IRS) as nonemployee compensation. Perhaps this was to advance the income tax reduction purposes of MCA. 4 In January 1985, MCA paid Pisello an additional $50,000. MCA later asked Pisello for three checks for $60,000 to show its auditors that it was attempting to collect money from him. This was consistent with MCA treating the payments as creating an account receivable. Pisello gave MCA the checks but he had insufficient funds to cover them. The following year, MCA sent Pisello a Form 1099 for the $50,000 payment. Pisello's accountant, in response, sent MCA a letter asserting that the payment was a loan.