Derwyn J. Booker - Page 17

          repayment, records that may reflect the transaction as a loan,              
          and the borrower's solvency at the time of the loan.  See Road              
          Materials, Inc. v. Commissioner, 407 F.2d 1121 (4th Cir. 1969),             
          affg. in part, vacating in part, and remanding T.C. Memo.                   
          1967-187; Jewell Ridge Coal Corp. v. Commissioner, 318 F.2d 695,            
          699 (4th Cir. 1963), affg. T.C. Memo. 1962-194.                             
               Petitioner did not provide sufficient evidence indicating              
          the existence of a bona fide debt.  The record clearly indicates            
          that petitioner entered into an investment agreement with Carter.           
          A contribution to capital is not a debt within the meaning of               
          section 166.  Raymond v. United States, 511 F.2d 185, 189 (6th              
          Cir. 1975); Hambuechen v. Commissioner, 43 T.C. 90, 99-100                  
          (1964); sec. 1.166-1(c), Income Tax Regs.  Petitioner himself               
          characterized his involvement with Carter as an investment in a             
          highly speculative business which he believed had the potential             
          for great rewards.  Although promissory notes were issued to                
          petitioner in connection with the advances, no repayments were              
          ever made with respect to the notes, and petitioner did not                 
          demand such repayments.  Additionally, no security or collateral            
          was ever offered in exchange for petitioner’s advances to Carter.           
          We find that petitioner’s advances to Carter can fairly be                  
          characterized as investments and not as debt within the meaning             
          of section 166.                                                             
               As a result of petitioner’s failure to prove the existence             
          of bona fide debt, we need not consider whether the “debt" became           

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