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used to demonstrate the features that could be built into the
houses it constructed for its customers or the building lots on
which those homes would be erected. Associates appeared not to
have expendable assets that could have been used to pay
petitioner without detriment to its business; rather, any assets
used to pay petitioner apparently would have had to have been
replaced if Associates were to continue in business. The absence
of liquid assets or of reasonably anticipated cash-flow out of
which to make repayments indicates that the 1981 transaction was
a contribution to capital rather than a loan. Segel v.
Commissioner, 89 T.C. at 830-831. Moreover, petitioner's
testimony indicates that he did not intend to demand payment
until business conditions for Associates improved and its assets
could be sold at full value. Petitioner's position as sole
shareholder of Associates, his concern for its welfare, and the
consequences of a demand for repayment indicate that it was
unlikely that such a demand would be made, and thus the
circumstances pointed to by petitioner do not indicate a
creditor's interest in repayment. Tyler v. Tomlinson, supra at
849; Dixie Dairies Corp. v. Commissioner, 74 T.C. at 495. The
fact that petitioner left the funds at the risk of Associates'
business suggests that he did not intend to demand payment to the
detriment of that business.
Petitioner did not obtain a security interest in any of
Associates' assets in connection with the 1981 transaction.
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