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Petitioner testified that he was Associates' sole stockholder and
that his control of the corporation was such that he could have
caused it to make a distribution "repaying" his "loan" at any
time. We conclude from petitioner's testimony that he relied on
his control of Associates as a stockholder to protect his
interests, rather than his status as a creditor, which indicates
that the 1981 transaction effected a contribution to Associates'
capital. Charter Wire, Inc. v. United States, 309 F.2d 878, 881
(7th Cir. 1962).
Additionally, the note did not provide for payment of
interest with respect to petitioner's "loan", even though, at the
time of the 1981 transaction, interest rates ranged between 18
and 19 percent, nor does the record suggest that a payment of
interest ever occurred. Petitioner's apparent indifference to
the receipt of interest suggests that he is not a true lender but
is principally concerned with the future earnings of Associates
or its increased market value. Slappey Drive Ind. Park v. United
States, 561 F.2d at 582; Segel v. Commissioner, supra at 833.
The timing of the 1988 distribution also indicates that the
1981 transaction effected a contribution to Associates' capital
rather than a loan. That distribution did not occur until more
than 7 years after the 1981 transaction, and nothing in the
record suggests that Associates similarly delayed payments of its
bona fide debts. O.H. Kruse Grain & Milling v. Commissioner, 279
F.2d 123, 126 (9th Cir. 1960), affg. T.C. Memo. 1959-110.
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