- 10 - American Offshore, Inc. v. Commissioner, 97 T.C. 579, 602 (1991). The presence of a fixed maturity date may be offset by other facts in the record. The Notes had a set repayment schedule. The presence of this schedule, however, is downplayed by the fact that Adult Fun made no payments in accordance therewith. Petitioner also did not pursue collection or inquire as to payment until Adult Fun was defunct. The facts at hand indicate that a debtor-creditor relationship was not contemplated by petitioner or Adult Fun. The actions of the parties to the Notes speak louder than words. Their actions are uncharacteristic of a bona fide debtor-creditor relationship. 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. American Offshore, Inc. v. Commissioner, supra at 605. Although the notes bore an interest rate of 10 percent, Adult Fun made no principal or interest payments to petitioner (ignoring, for the moment, the transfer of the leasehold improvements). The record also indicates that petitioner took no meaningful steps to enforce any amounts that were due under the terms of the Notes. This factor weighs toward equity.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011