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Petitioners contend that this factor supports treating the
LIIBV advances to them as debt because LIIBV did not own any
stock of petitioners. We disagree. The fact that LIIBV did not
own stock of petitioners is insignificant because LTL, through
DeGroote and his core management team, controlled petitioners and
LIIBV. See Plantation Patterns, Inc. v. Commissioner, supra;
Foresun, Inc. v. Commissioner, supra.
Petitioners contend that the LIIBV advances were freely
transferable. They rely on Tomlinson v. 1661 Corp., supra at
297, in which the Court of Appeals for the Fifth Circuit said
that if a debenture is freely transferable, the proportional
participation and control factor does not apply. Even if
petitioners were correct on this point, the result would be that
we would treat this factor as neutral.
Petitioners contend that this factor should be given little
weight with respect to LWSI before December 1987 because about
half of LII's shares were then publicly held. We disagree that
the fact that some of LII's stock was publicly held helps
petitioners. First, LII's directors had reason to approve the
LIIBV advances because LII could not get financing from
commercial lenders with terms more favorable to LWSI and LII than
they could get from LIIBV. Second, LII's brief period with
minority shareholders and independent directors did not mean it
dealt with LIIBV at arm's length.
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