Laidlaw Transportation, Inc. and Subsidiaries - Page 76

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          that effect, they meant that, in substance, petitioners paid no             
          interest to LIIBV.                                                          
               This factor supports treating the LIIBV advances to                    
          petitioners as equity.                                                      
               11. Ability of the Corporation To Obtain Loans From Outside            
                    Lending Institutions                                              
               If a corporation can borrow money from outside sources when            
          it receives a transfer of funds, the transfer is more likely to             
          be debt.  Estate of Mixon v. United States, supra at 410;                   
          Tomlinson v. 1661 Corp., supra.                                             
               Petitioners contend that they could have borrowed                      
          $975,153,806 from outside sources during the years in issue on              
          commercially reasonable terms.  To support their position,                  
          petitioners cite the testimony of Jacobs, petitioners' expert               
          Hollis W. Rademacher (Rademacher), and three letters from                   
          investment bankers.                                                         
               Rademacher testified that a bank would not have required the           
          loans to be secured, but that a negative pledge or prohibition              
          against other indebtedness for borrowed money would have                    
          sufficed.  In contrast, respondent's expert, Filmore G. Enger,              
          Jr. (Enger), testified that security would be very important for            
          loans of this magnitude.  We think Enger's view was more                    
          realistic.  Generally speaking, creditors avoid subjecting funds            
          to the risk of the borrower's business as much as possible and              
          seek a reliable return, while shareholders take that risk and               
          hope for a return from the business' success.  Slappey Drive                




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