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all of petitioner’s Federal income tax returns that are in issue
herein.
OPINION
1. Bad Debt
We must decide whether, for the 1991 taxable year, section
166(a) lets petitioner deduct the excess advances of $9,035
($30,035 - $21,000), or whether the advances were contributions
to Adult Fun’s capital. Whether a payment represents debt or
equity is a question of fact. Roth Steel Tube Co. v.
Commissioner, supra at 629. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
A taxpayer may deduct worthless debts. Sec. 166(a). The
term “debt” connotes a true debtor-creditor relationship that
obligates the debtor to pay the creditor a fixed or determinable
sum of money. Sec. 1.166-1(c), Income Tax Regs. Capital
contributions are not debt. Capital contributions are equity.
Roth Steel Tube Co. v. Commissioner, 800 F.2d 625, 629 (6th Cir.
1986), affg. T.C. Memo. 1985-58; Raymond v. United States,
511 F.2d 185, 189 (6th Cir. 1975); Calumet Indus., Inc. v.
Commissioner, 95 T.C. 257, 284 (1990).
Courts refer to numerous factors to determine whether a
payment represents debt or equity. The Court of Appeals for the
Sixth Circuit, to which appeal in this case lies, refers
primarily to 11 factors. See Roth Steel Tube Co. v.
Commissioner, supra at 630. These factors are: (1) The names
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