- 66 -
even if inchoate, increased LIIBV's risk. See United States v.
Snyder Bros. Co., 367 F.2d 980, 981, 984-985 (5th Cir. 1966).
Failure to demand timely repayment effectively subordinates
intercompany debt to the rights of other creditors who receive
payment in the interim. American Offshore, Inc. v. Commissioner,
97 T.C. 579, 603 (1991); Inductotherm Indus., Inc. v.
Commissioner, T.C. Memo. 1984-281, affd. without published
opinion 770 F.2d 1071 (3d Cir. 1985). LIIBV's postponement of
repayments by petitioners effectively subordinated what
petitioners contend is debt to LIIBV.
The question before us is whether the advance has a status
equal or inferior to the claims of a regular corporate creditor.
Estate of Mixon v. United States, supra. We conclude that the
postponement agreements and the effective subordination as a
result of failing to demand repayment made the obligations to
repay LIIBV inferior to the claims of petitioners' regular
corporate creditors. Thus, this factor supports treating the
LIIBV advances to petitioners as equity.
7. Intent of the Parties
The intent of the parties is important in deciding whether
payments are debt or equity. Petitioners contend that they
intended their payments to LIIBV to be interest. Petitioners
rely primarily on the evidence showing the form they used for the
transactions at issue. More weight is given to objective facts
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