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Mr. Mohney testified that he simply forgot about the transaction
and the debt owed to him. We find this testimony unbelievable,
and, even assuming arguendo that it was credible (which it was
not), we find this testimony to be uncharacteristic of a bona
fide creditor.
This factor weighs toward equity.
iii. Interest Rate and Payments
The presence of a fixed rate of interest and actual interest
payments weigh toward debt. The absence of payments in
accordance with the terms of a debt instrument weighs toward
equity. Id. at 605.
Although the Clarksville note bore an interest rate of
10 percent, petitioner made no principal or interest payments to
Mr. Mohney until 12 years after the transfer. Petitioner also
made no principal or interest payments to Mr. Mohney on the
Mishawaka transfer until 12 years after the transfer.
This factor weighs toward equity.
iv. Repayment
Repayment that is dependent upon corporate earnings weighs
toward equity. Repayment that is not dependent on earnings
weighs toward debt. Roth Steel Tube Co. v. Commissioner, supra
at 632; Lane v. United States, 742 F.2d 1311, 1314 (11th Cir.
1984); American Offshore, Inc. v. Commissioner, supra at 602.
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