Billie and Florence Lykins - Page 10

          There is nothing in the record to suggest that petitioner's 50-             
          percent partnership interest in J & M decreased or was otherwise            
          affected by such repayment.  This is compelling evidence that the           
          advance to Tag Coal was not tied to an equity interest in J & M,            
          and that the advance was a loan as opposed to a capital                     
               Fourth, Tag Coal's failure to repay $131,163.79 of the                 
          amount advanced was not voluntary.  The outstanding debt became             
          worthless only because Tag Coal was forced to declare bankruptcy            
          after Commonwealth defaulted on its contract.  We have no reason            
          to think that Tag Coal would not have repaid the outstanding loan           
          if Tag Coal had remained solvent.  Moreover, there is no                    
          indication in the record, nor does respondent contend, that                 
          petitioner could have foreseen that Tag Coal would become                   
          insolvent.  In sum, petitioner reasonably believed that Tag Coal            
          could and would repay the loan.                                             
               Petitioner's genuine intent to create a debtor-creditor                
          relationship, the reasonable expectation of repayment, and the              
          absence of any change in petitioner's equity interest in                    
          J & M upon repayment by Tag Coal lead us to conclude that the               
          advance by petitioner to Tag Coal was a loan and not a capital              
          contribution.  Accordingly, we decide this issue for petitioners.           

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