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i. Name of Certificate
We look to the name of the certificate evidencing
purported debt to determine the “debt’s” true label.
The issuance of a note weighs toward debt. Estate of Mixon v.
United States, 464 F.2d 394, 403 (5th Cir. 1972). The mere fact
that a taxpayer issues a note, however, is not dispositive of
debt. An unsecured note, with no payments made thereon until
long after the due date, weighs toward equity. Stinnett's
Pontiac Serv. Inc. v. Commissioner, 730 F.2d 634, 638 (11th Cir.
1984), affg. T.C. Memo. 1982-314.
Although Adult Fun issued the Notes with respect to the
advances, and the Notes bore a stated interest rate of
10 percent, we give these facts little weight. The Notes were
unsecured, and Adult Fun did not repay the amounts reflected
therein according to the Notes’ terms. Petitioner focuses on the
fact that it recorded debt on its books in connection with the
transfer. We are not impressed. Under the facts herein,
petitioner’s accounting entry lends little (if any) support for a
finding of debt. See Raymond v. United States, supra at 185.
This is especially so, given the fact that the parties were
dealing at other than arm's length.
This factor is neutral.
ii. Fixed Maturity Date
The presence of a fixed maturity date weighs toward debt,
but is not dispositive of a debtor-creditor relationship.
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