- 13 - Petitioner did not receive (nor did it attempt to receive) any type of security interest or personal guarantees for its advances. If Adult Fun’s business did not prosper, petitioner could only recover its advances from its share of the proceeds which remained after obligations to secured creditors were satisfied. Indeed, when petitioner accepted an assignment from Adult Fun in 1992, all that remained were various leasehold improvements. Mr. Krontz explained that he did not require security because of the relationship between Adult Fun and petitioner as members of Mr. Mohney's enterprises, their physical proximity to each other, and his business relationship with Adult Fun's president. We find this testimony unpersuasive of a bona fide debtor-creditor relationship. We do not believe that an outside lender would have loaned substantial sums to Adult Fun in an arms-length transaction under the facts at hand. Once again, the actions of the parties to the Notes speak louder than words, and those actions do not support a true debtor-creditor relationship with respect to the advances. This factor weighs toward equity. viii. Inability to Obtain Financing The question of whether a transferee could have obtained comparable financing is relevant in measuring the economic reality of a transfer. Estate of Mixon v. United States, 464 F.2d at 410; Nassau Lens Co. v. Commissioner, 308 F.2d 39, 47 (2d Cir. 1962) remanding 35 T.C. 268 (1960). Evidence that thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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