- 8 -
when resolving whether an advance is bona fide debt or a
contribution to capital: (1) Names given to the certificates
evidencing indebtedness; (2) presence or absence of a fixed
maturity date; (3) source of payments; (4) right to enforce the
payment of principal and interest; (5) participation and
management; (6) a status equal to or inferior to that of regular
creditors; (7) intent of the parties; (8) "thin" or adequate
capitalization; (9) identity of interest between creditor and
stockholder; (10) payment of interest only out of profits; and
(11) ability to obtain loans from outside lending institutions.
See Hardman v. United States, 827 F.2d 1409, 1411-1412 (9th Cir.
1987); Bauer v. Commissioner, 748 F.2d 1365, 1368 (9th Cir.
1984), revg. T.C. Memo. 1983-120; A.R. Lantz Co. v. United
States, 424 F.2d 1330, 1333 (9th Cir. 1970); Anchor Natl. Life v.
Commissioner, 93 T.C. 382, 400 (1989). Whether an advance
constitutes debt or equity depends on the facts and circumstances
of each case. See Calumet Indus., Inc. v. Commissioner, supra at
285. No single factor is determinative. See id. "The various
factors * * * are only aids in answering the ultimate question
whether the investment, analyzed in terms of its economic
reality, constitutes risk capital entirely subject to the
fortunes of the corporate venture or represents a strict debtor-
creditor relationship." Fin Hay Realty Co. v. United States, 398
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011