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the advances as advertising or promotional expenses of Dr.
Rosenberg’s plastic surgery practice.
A. Whether Petitioners' Advances to Cabana Boy Were Debt or
Equity
Petitioners contend that their advances to Cabana Boy were
loans that became worthless in the years in issue. Respondent
contends that the claimed advances were equity.
A taxpayer may deduct a bona fide debt that becomes
worthless in the taxable year. See sec. 166(a)(1). Taxpayers
generally bear the burden of proving that the transfers by the
taxpayers to the corporations were loans and not equity. See
Rule 142(a); Dixie Dairies Corp. v. Commissioner, 74 T.C. 476,
493 (1980). The question of whether a transfer of funds to a
closely held corporation is debt or equity must be decided based
on all the relevant facts and circumstances. We consider various
factors in deciding whether a loan is bona fide. See Estate of
Mixon v. United States, 464 F.2d 394, 402 (5th Cir. 1972). No
single factor controls. See John Kelley Co. v. Commissioner, 326
U.S. 521, 530 (1946); Fin Hay Realty Co. v. United States, 398
F.2d 694, 697 (3d Cir. 1968). We next apply these factors to
this case.
1. Name Given to the Certificate Evidencing the Transfer
of Funds
The issuance of a stock certificate in exchange for an
advance suggests that the advance is equity, and the issuance of
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