14
Respondent counters that petitioner and Safeguard failed to
follow customary business practices, indicating that the
obligation was not a true debt. In this regard, respondent
points out that at the time the agreement was entered into
neither petitioner nor Safeguard required a final payment date, a
written repayment schedule, a minimum repayment amount based on a
dollar amount or percentage of income, or a specified interest
factor.
We agree with respondent that these factors were clearly
present and tend to indicate that the obligation was not bona
fide. While we believe the testimony of the witnesses to be
credible, the subjective intent of the debtor to repay and the
subjective expectation of the lender to be repaid are not
controlling. Graf v. Commissioner, supra at 952 (citing Denver &
R.G.W. R.R. v. United States, 205 Ct. Cl. 597, 603, 505 F.2d
1266, 1267 (1974)). "It is mere conjecture that a taxpayer will
make payments when he is not so obligated." Id.
In addition, it is not clear when Safeguard's right to
foreclose on the "collateral" would be triggered. Safeguard's
right to terminate the agreement, and thereafter transfer the
lists, was not absolute. After termination of the agreement,
Safeguard clearly had the right to transfer the lists in a manner
consistent with its own best interests. However, there is no
evidence in the record from which we can determine what the value
might be at any such time. We cannot determine from the record
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011