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or coverage ratios were based on fair market values. Banks which
made commercial loans to petitioners generally determined
financial ratio requirements by referring to the book values of
the Laidlaw borrowers and guarantors.
Petitioners contend that it is well established that a
borrower's debt to equity ratio is based on the fair market value
of its assets, citing Dillin v. United States, 433 F.2d 1097,
1102 (5th Cir. 1970). We disagree with petitioners' reading of
Dillin. In that case, the fund recipient's debt to equity ratio
was 800 to 1 based on book value and 2.5 to 1 based on fair
market value. The Court of Appeals for the Fifth Circuit
affirmed the district court's decision that the advance was
equity. Even if we considered fair market value debt to equity
ratios, petitioners fare no better because their debt to equity
ratios were worse than those of their competitors using either
book or fair market values. See also Slappey Drive Indus. Park
v, United States, 561 F.2d at 579, 584-585 n.22 (discussing but
not deciding whether fair market values are relevant in deciding
whether capitalization is adequate).
c. Whether To Consider Only Debt and Equity
Related to Capital Assets To Start Operations
Petitioners contend that, in applying this factor, Estate of
Mixon v. United States, supra at 408, requires that we consider
only debt and equity related to capital assets needed to start
operations. We disagree. Estate of Mixon v. United States,
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