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We find that petitioners have failed to carry their burden
of proof. Our analysis of the advances at issue under the
factors listed above convinces us that these advances were
contributions to capital rather than loans.
Formal Indicia of the Arrangement
On brief, respondent concedes that Mr. Kadlec's advances
possessed the formal indicia of loans. The advances were
memorialized by promissory notes specifying the payment of a sum
certain at a fixed maturity date with interest and providing Mr.
Kadlec with the right to enforce payments. However, allegedly
objective economic indicia of debt, such as consistent
bookkeeping and consistent financial reporting on balance sheets,
are little more than additional declarations of intent, without
accompanying objective economic indicia of debt. Dixie Dairies
Corp. v. Commissioner, 74 T.C. at 495 (citing Alterman Foods,
Inc. v. United States, 505 F.2d 873, 879 (5th Cir. 1974)). In
the instant case, the formal indicia surrounding Mr. Kadlec's
advances are overcome by other factors that establish that, as a
matter of economic reality, Mr. Kadlec's advances were capital
contributions.
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