- 9 -
the documents evidencing the purported loans; (2) the presence or
absence of fixed maturity dates with regard to the purported
loans; (3) the likely source of any repayments; (4) whether the
taxpayers could or would enforce repayment of the transfers;
(5) whether the taxpayers participated in the management of the
corporations as a result of the transfers; (6) whether the
taxpayers subordinated their purported loans to the loans of the
corporations’ creditors; (7) the intent of the taxpayers and the
corporations; (8) whether the taxpayers who are claiming creditor
status were also shareholders of the corporations; (9) the
capitalization of the corporations; (10) the ability of the
corporations to obtain financing from outside sources at the time
of the transfers; (11) how the funds transferred were used by the
corporations; (12) the failure of the corporations to repay; and
(13) the risk involved in making the transfers. Calumet Indus.
Inc. v. Commissioner, 95 T.C. 257, 285 (1990); Dixie Dairies
Corp. v. Commissioner, supra at 493.
The above factors serve only as aids in evaluating whether
taxpayers’ transfers of funds to closely held corporations should
be regarded as risk capital subject to the financial success of
the corporations or as bona fide loans made to the corporations.
Fin Hay Realty Co. v. United States, 398 F.2d 694, 697 (3d Cir.
1968). No single factor is controlling. Dixie Dairies Corp. v.
Commissioner, supra at 493.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011