William C. Beretta - Page 12

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                  Although we are not deciding a debt versus equity question,                           
            we find that the test used by this Court in deciding that issue                             
            will be useful in deciding whether petitioner's transfers of                                
            funds to the restaurants constituted loans.  The question of                                
            whether a transfer of funds to a closely held business                                      
            constitutes debt or equity must be decided on the basis of all                              
            relevant factors.  Dixie Dairies Corp. v. Commissioner, 74 T.C.                             
            476, 493 (1980). Courts look to the following nonexclusive                                  
            factors to evaluate the nature of transfers of funds to closely                             
            held businesses:  (1) The names given to the documents evidencing                           
            the purported loans; (2) the presence or absence of fixed                                   
            maturity dates with regard to the purported loans; (3) the likely                           
            source of any repayments; (4) whether the taxpayers could or                                
            would enforce repayment of the transfers; (5) whether the                                   
            taxpayers participated in the management of the business as a                               
            result of the transfers; (6) whether the taxpayers subordinated                             
            their purported loans to the loans of the corporation's                                     
            creditors; (7) the intent of the taxpayers and the corporations;                            
            (8) whether the taxpayers who are claiming creditor status were                             
            also shareholders of the corporations; (9) the capitalization of                            
            the corporations; (10) the ability of the corporations to obtain                            
            financing from outside sources at the time of the transfers; (11)                           
            how the funds transferred were used by the corporations; (12) the                           







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