- 9 -
supra at 1124. Furthermore, when a transaction involves a
closely held corporation, the form and labels assigned to the
transaction may not have much significance because the parties
can mold the transaction to their will. Anchor Natl. Life Ins.
Co. v. Commissioner, 93 T.C. 382, 407 (1989). It is the
substance of the transaction, rather than the form, that controls
for tax purposes. Road Materials, Inc. v. Commissioner, supra at
1124.
Circumstances other than the form of the loan indicate that
the substance of the 1981 transaction did not accord with its
form. The note was payable on demand and did not have a fixed
maturity date because, as petitioner explained, he was unsure
when business conditions would enable Associates to resume
operations. The absence of a fixed maturity date indicates that
repayment was tied to the fortunes of the business, which
suggests that the 1981 transaction effected a contribution to
Associates' capital. In re Lane, 742 F.2d 1311, 1316 (11th Cir.
4 (...continued)
line, petitioner may have stepped into the shoes of the bank as
Associates' creditor pursuant to the equitable doctrine of
subrogation. The question whether the 1981 transaction was a
loan or effected a contribution to Associates' capital must be
resolved based on whether or not, considering all of the
circumstances in the record, petitioner intended to create a
debtor-creditor relationship between Associates and himself. In
re Lane, 742 F.2d 1311, 1319-1320 (11th Cir. 1984); Santa Anita
Consol., Inc. v. Commissioner, 50 T.C. 536, 550 (1968); Kavich v.
United States, 507 F. Supp. 1339, 1342 n.2 (D. Neb. 1981).
Petitioner admits as much on brief. Moreover, petitioner cannot
use the doctrine to appropriate for himself the bank's status as
a bona fide creditor of Associates.
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