- 19 -
ii. Fixed maturity date
The presence of a fixed maturity date points toward debt.
The absence of a fixed maturity date usually points toward
equity. Such an absence tends to show that repayment is more
likely tied to the fortunes of a business. Hardman v. United
States, 827 F.2d at 1413; American Offshore, Inc. v.
Commissioner, 97 T.C. at 602. The fact that a fixed maturity
date is absent from a case, however, does not necessarily mean
that a purported debt is actually equity. In such a case, the
Court must ascertain whether the lack of a fixed maturity date is
explainable or otherwise negated by other evidence in the record.
See Hardman v. United States, supra at 1413.
Because petitioner did not issue notes to evidence the
advances as debt, we do not find a written maturity date for the
advances' repayment. We find, however, that the advances were
repayable on demand. It is also relevant that Kenilworth had a
prior history of borrowing money from petitioner for short
periods of time, and of repaying timely these debts. Estate of
Mixon v. United States, supra at 404. The same is true with
respect to the fact that petitioner demanded that Kenilworth
repay petitioner all debts (including the advances) due it after
the Crash. Such a demand for repayment is evidence of a
debtor-creditor relationship. Montgomery v. United States,
87 Ct. Cl. 218, 23 F. Supp. 130 (1938); see also Sattelmaier v.
Commissioner, T.C. Memo. 1991-597.
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011