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385(b)(1); American Offshore, Inc. v. Commissioner, 97 T.C. 579,
602 (1991). Evidence that a creditor did not intend to enforce
payment of the note or was indifferent as to the exact time the
note was to be repaid belies an arm's-length debtor-creditor
relationship. See generally Gooding Amusement Co. v.
Commissioner, 23 T.C. 408, 418-421 (1954), affd. 236 F.2d 159
(6th Cir. 1956).
In the instant case, whether or not petitioner would be
repaid was contingent upon the sale of the Corbin properties.
Although the terms of the promissory note stated that the
$200,000 principal and interest would be due and payable on June
1, 1992, both petitioner and Mr. Magness testified that the note
did not properly reflect the terms of their agreement. Under
their oral agreement, repayment of the advance was due when the
Corbin properties sold, and, in fact, neither Mr. Magness nor
petitioner anticipated the advance would be repaid on June 1,
1992. Petitioner testified: “June 1st, ‘92 the project wasn’t
done, but it was our understanding that he wasn’t going to pay-–
he had no way of paying if the project didn’t sell, and we both
understood that.” In reality, no fixed maturity date existed,
and repayment was directly linked to the success of the Corbin
project. This factor favors respondent’s position.
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