Deja Vu, Inc. - Page 15

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               This factor weighs toward equity.                                      
               ix.   Subordination                                                    
               Subordination of purported debt to the claims of other                 
          creditors weighs towards equity.  Roth Steel Tube Co. v.                    
          Commissioner, supra at 631-632; Stinnett's Pontiac Serv. Inc. v.            
          Commissioner, 730 F.2d at 639; Raymond v. United States, 511 F.2d           
          at 191; Austin Village v. Commissioner, supra at 745.                       
               Petitioner presented no evidence on the order of priority of           
          Adult Fun’s debts.  Given the fact, however, that the advances              
          were unsecured, petitioner's right to repayment would have been             
          subordinate to the interests of the secured creditors, if any.              
          At best, petitioner and the other unsecured creditors could have            
          shared in the proceeds that remained after the secured creditors            
          were satisfied.                                                             
               This factor weighs toward equity.                                      
               x.  Use of Funds                                                       
               The transfer of funds from a shareholder to a corporation in           
          order to meet the corporation’s daily business needs weighs                 
          toward debt.  The transfer of funds from a shareholder to a                 
          corporation in order to purchase capital assets weighs toward               
          equity.  Roth Steel Tube Co. v. Commissioner, 800 F.2d at 632;              
          Stinnett's Pontiac Serv. Inc. v. Commissioner, supra at 640;                
          Raymond v. United States, supra at 191.                                     
               The purported notes represented a long term commitment that            
          was payable mainly from future income.  While some of the                   




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