- 16 -
under the Internal Revenue Code."), affg. in part, vacating in
part and remanding T.C. Memo. 1967-187.
In addition, petitioner could not have realistically
expected repayment at the time he made the advance in light of
National's financial condition. Petitioner's contribution was
made during the early stages of the corporation's operations.
See Leuthold v. Commissioner, T.C. Memo. 1987-610. A demand by
petitioner for repayment would have jeopardized the future
success of the corporation on which his continued employment
depended. See Davis v. Commissioner, 69 T.C. 814, 836 (1978).
7. "Thin" or Adequate Capitalization
An advance to a corporation appears to be equity if the
corporation is thinly capitalized. American Offshore, Inc. v.
Commissioner, 97 T.C. 579, 604 (1991). No specific ratio of debt
to equity determines whether a corporation is adequately
capitalized. 2554-58 Creston Corp. v. Commissioner, 40 T.C. 932,
937 n.3 (1963). However, this Court has held that debt to equity
ratios of 800 to 1, American Offshore, Inc. v. Commissioner,
supra at 604; 205 to 1, 2554-58 Creston Corp. v. Commissioner,
supra at 937; and 123 to 1, Ambassador Apartments, Inc. v.
Commissioner, supra at 245, indicated inadequate capitalization.
This case closely parallels Thompson v. Commissioner, 73
T.C. 878 (1980). In Thompson, this Court held that the subject
advances of $20,000 were contributions to capital where a
business had been incorporated with a minimal capital
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