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5. Whether the Provider of the Advance Gains an Increased
Right To Participate in Management
If, as a result of an advance of funds, the provider of the
funds has an increased right to participate in the management of
the recipient, then it is acting more like a shareholder than a
creditor. Estate of Mixon v. United States, supra at 406. The
documents evidencing the advances did not give LIIBV any right to
participate in the management of the borrowers or the guarantors.
However, this would have been unnecessary because LTL and its
core management team already controlled LIIBV and petitioners.
This factor is neutral.
6. The Status of the Contribution in Relation to Regular
Creditors
Whether an advance is equal or subordinate to the claims of
regular corporate creditors affects whether the taxpayer was
dealing as a shareholder or creditor. Estate of Mixon v. United
States, supra.
Petitioners point out that Haworth testified that LIIBV did
not subordinate or postpone petitioners' repayment to it.
Petitioners contend that the LIIBV loans to Transit and Tree
(guaranteed by LTI) were not subject to subordination or
postponement agreements. Petitioners contend that, although LTL
entered into postponement agreements in favor of RBC and BBC in
November 1986, these agreements did not affect LIIBV's legal
rights under its loans to LWSI. Petitioners contend that the
postponement agreements were not subordination agreements under
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