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entire capital base of $900. No sinking fund or reserve existed
to insure repayment of the advance. Instead, the shareholder
contributors expected to be repaid out of earnings from
National's operations.
4. Right to Enforce Payment
If a fixed obligation to repay the advance exists, the
transaction is indicative of a loan. Estate of Mixon v. United
States, supra at 405. Such an obligation is present in the
instant case. However, while petitioner's note was fully
enforceable, he took none of the customary steps to assure
repayment in the event the business failed. No sinking fund was
established, and the note lacked even a modicum of security to
protect petitioner at least against the claims of unsecured
creditors or subsequent lienholders. Moreover, other than
petitioner's self-serving testimony, no evidence was presented
that he ever demanded repayment of the note.
This case is distinguishable from Baldwin v. Commissioner,
T.C. Memo. 1993-433, in which a partnership had experienced such
success in its first 9 months of operation that the taxpayer was
understandably not concerned with repayment of the advances he
made in the short term. Here, there was no early indication of
success on the part of National. In fact, the evidence all
points to the fact that "from day one, the business went
downhill". While the Court recognizes that petitioner's concern
for his job might have made him reluctant to badger the other
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