-18-
payments. Ms. Jackson used that approach as an inducement for
petitioner to advance more funds into their joint venture by
providing him with ownership as security and rental income in
exchange for additional funding. We note that the machinery was
worth about $100,000, the equivalent of about one-sixth of the
funds advanced.
The substance of petitioner’s involvement with Ms. Jackson
and her corporation was to profit from obtaining government road
contracts. Respondent’s position that petitioner was a passive
investor who advanced two-thirds of a million dollars with only
limited security and no stock ownership does not ring true.
Respondent, concerning whether petitioner should be treated as a
creditor, refers to petitioner as a "white knight" who advanced
funds to Ms. Jackson and Cities. It is difficult to imagine any
reason for petitioner’s substantial participation other than his
interest in the "pot" of profits at the end of Ms. Jackson‘s
promotional "rainbow" and the rent he was to receive from leasing
the machinery.
Early in the relationship, petitioner was to receive 50
percent of the profits from the government road contract. When
Cities' involvement in the government contract was canceled and
things began to deteriorate, petitioner was promised all of the
receipts from the government contracts--which, at that time,
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