Charles Kadlec and Leslie C. Kadlec - Page 7

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          determinable sum of money.  Sec. 1.166-1(c), Income Tax Regs.               
          This is in contrast to a contribution to capital or equity                  
          investment, which is not considered debt for purposes of section            
          166.  Kean v. Commissioner, 91 T.C. 575, 594 (1988); sec. 1.166-            
          1(c), Income Tax Regs.  Respondent determined that Mr. Kadlec’s             
          advances to SLI constituted capital contributions as opposed to             
          loans.  Respondent's determination is presumed correct, and                 
          petitioners bear the burden of proving otherwise.  Rule 142(a);             
          Welch v. Helvering, 290 U.S. 111 (1933); Dixie Dairies Corp. v.             
          Commissioner, 74 T.C. 476, 493 (1980).                                      
               The characterization of advances to a corporation by a                 
          shareholder is a question of fact to be determined from all the             
          facts and circumstances.  Gilbert v. Commissioner, 262 F.2d 512,            
          513 (2d Cir. 1959), affg. T.C. Memo. 1958-8; Georgia-Pacific                
          Corp. v. Commissioner, 63 T.C. 790, 795 (1975).  Courts have                
          considered the following nonexclusive list of factors in                    
          determining whether advances, such as those involved in the                 
          instant case, are loans or equity investments:                              

               (1) the intent of the parties; (2) the identity between                
               creditors and shareholders; (3) the extent of                          
               participation in management by the holder of the                       
               instrument; (4) the ability of the corporation to                      
               obtain funds from outside sources; (5) the "thinness"                  
               of the capital structure in relation to debt; (6) the                  
               risk involved; (7) the formal indicia of the                           
               arrangement; (8) the relative position of the obligees                 
               as to other creditors regarding the payment of interest                
               and principal; (9) the voting power of the holder of                   
               the instrument; (10) the provision of a fixed rate of                  




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