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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 the
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