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the courts. The Court of Appeals for the Fifth Circuit has
stated:
Primary reliance upon subjective indications of intent
is simply not an effective way of resolving * * * [the
debt versus equity] problem. In a land of hard
economic facts, we cannot root important decisions in
parties' pious declarations of intent. * * * [Texas
Farm Bureau v. United States, 725 F.2d 307, 314 (5th
Cir. 1984).]
Thus, we must look not simply at the pronouncements of the
parties, but also at the circumstances surrounding the
transaction to reveal their intent. Tyler v. Tomlinson, 414 F.2d
844, 850 (5th Cir. 1969). If a corporation does not make
required payments or a shareholder does not enforce his right to
receive payments, an advance appears more like equity than debt.
Ambassador Apartments, Inc. v. Commissioner, 50 T.C. 236, 246
(1968), affd. 406 F.2d 288 (2d Cir. 1969).
In the instant case, petitioner stated in his brief that
"The terms and conditions of the second mortgage and the loan
were identical. By the nature of this obligation it is clear
that the debt was obviously a loan and not a contribution to any
equity." However, the underlying note detailing the mortgage's
terms is not part of the record. (While Brands expressed general
knowledge of a mortgage on petitioner's residence held by
Tavistock, he was not aware of the specifics of that
transaction.)
Even if petitioner subjectively intended to make a loan, the
circumstances surrounding the advance point to a contribution to
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