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petitioner before going out of business. Though no outside
financing was sought, it is reasonable to assume that an outside
financier would not have accepted similar credit terms: an open,
unsecured line of credit with no set interest rate, no set
payment schedule, and no fixed maturity date to three companies
with no financial history and no capital assets.
As shown by their actions, the parties intended the funds
advanced to be an investment in FWC, CAI, and ASC. For these
reasons, we find that petitioner made an equity investment in
FWC, CAI, and ASC. When the three failed to repay petitioner the
funds it had extended, petitioner suffered a capital loss.
In light of the foregoing,
Decision will be entered under
Rule 155.
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Last modified: May 25, 2011