- 7 -
the transaction as a loan; (7) any repayments have been made; and
(8) the borrower was solvent at the time of the loan. See Hunt
v. Commissioner, T.C. Memo. 1989-335; see also Zimmerman v.
United States, 318 F.2d 611, 613 (9th Cir. 1963); Estate of
Maxwell v. Commissioner, 98 T.C. 594, 604 (1992), affd. 3 F.3d
591 (2d Cir. 1993); Estate of Kelley v. Commissioner, 63 T.C.
321, 323-324 (1974); Rude v. Commissioner, 48 T.C. 165, 173
(1967); Clark v. Commissioner, 18 T.C. 780, 783 (1952), affd. per
curiam 205 F.2d 353 (2d Cir. 1953); Bragg v. Commissioner, supra.
The factors are not exclusive, and no one factor controls.
Rather, our evaluation of the various factors provides us with an
evidentiary basis upon which we make our ultimate factual
determination of whether a bona fide indebtedness existed. See
Litton Bus. Sys., Inc. v. Commissioner, 61 T.C. 367, 377 (1973).
With those factors in mind, we turn to the facts and
circumstances surrounding the transaction to determine whether a
bona fide debtor-creditor relationship was created.
1. Promissory Note or Other Evidence of Indebtedness
Petitioners introduced a promissory note to Jeffrey, signed
by Stephen, for $100,000. Petitioners also introduced an
agreement between petitioner and Jeffrey whereby petitioner
purchased the note for $100,000.
2. Interest
The note executed by Stephen to Jeffrey stated that interest
would be paid at the rate of 13 percent per annum on the unpaid
principal amount. At some time after petitioner acquired the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011