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166(a). To justify a deduction under section 166, petitioners
must establish that a bona fide debt existed. Sec. 1.166-1(c),
Income Tax Regs. A bona fide debt arises from a debtor-creditor
relationship based upon a valid and enforceable obligation to pay
a fixed or determinable sum of money. A shareholder's
contribution to the capital of a corporation is not considered a
debt for purposes of section 166. Sec. 1.166-1(c), Income Tax
Regs; see United States v. Uneco, Inc. (In re Uneco, Inc.), 532
F.2d 1204, 1207 (8th Cir. 1976); Kean v. Commissioner, 91 T.C.
575, 594 (1988).
Characterization of an advance by a shareholder to a
corporation as either a loan (debt) or contribution to capital
(equity) is a question of fact that can be resolved only by
reviewing the circumstances surrounding the transaction. Dixie
Dairies Corp. v. Commissioner, 74 T.C. 476, 493 (1980).
In reviewing the surrounding circumstances of such
transactions, the following factors should be considered: (1)
The name given to the certificate evidencing the indebtedness;
(2) the presence or absence of a fixed maturity date; (3) the
source of payments; (4) the right to enforce payment of principal
and interest; (5) participation in management flowing as a result
of the advance; (6) the status of the contribution in relation to
regular corporate creditors; (7) the intent of the parties; (8)
"thin" or adequate capitalization; (9) identity of interest
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