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business world. Santa Anita Consol., Inc. v. Commissioner, 50
T.C. 536, 550 (1968).
Kenilworth failed to issue a note to petitioner to evidence
the advances as debt. Under the facts at hand, however, we do
not consider this failure dispositive. Not only did Kenilworth
fail to issue petitioner a debt instrument for the advances,
Kenilworth did not issue petitioner an equity instrument.
Moreover, Mr. Roven was the financial officer of both of these
entities, and he testified that the lack of a note stemmed from
his belief that notes were not required to document the advances
as debt. Petitioner and Kenilworth were commonly controlled, and
petitioner recorded the advances as "loans" at or about the time
of each advance. In addition, Kenilworth had a history before
the Crash of repaying the advances timely and expeditiously.
Loans between related entities are sometimes agreed upon
informally, without the formality of a note. See Levenson &
Klein, Inc. v. Commissioner, 67 T.C. 694, 713-714 (1977). In the
instant setting, we believe that petitioner's recording of the
advances as "loans" supports its argument that the advances are
debt, and that Kenilworth's failure to issue petitioner a formal
instrument of debt is not inconsistent with petitioner's
argument.
This factor favors classifying the advances as debt.
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