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3. Source of Payments
If the source of the debtor's repayment is dependent upon
earnings or is from a restricted source, such as a judgment
recovery, dividends, or profits, an equity investment is
indicated. See Estate of Mixon v. United States, supra at 407;
Calumet Indus., Inc. v. Commissioner, 95 T.C. at 287; Dixie
Dairies Corp. v. Commissioner, 74 T.C. 476, 495 (1980); Irbco
Corp. v. Commissioner, T.C. Memo. 1966-67. In such a case, “the
‘lender’ acts ‘as a classic capital investor hoping to make a
profit, not as a creditor expecting to be repaid regardless of
the company’s success or failure.’" Calumet Indus., Inc. v.
Commissioner, supra at 287-288 (quoting In re Larson, 862 F.2d
112, 117 (7th Cir. 1988)). When circumstances make it impossible
to estimate when an advance will be repaid because repayment is
contingent upon future profits or repayment is subject to a
condition precedent, or where a condition may terminate or
suspend the obligation to repay, an equity investment is
indicated. See Affiliated Research, Inc. v. United States, 173
Ct. Cl. 338, 351 F.2d 646, 648 (1965); Irbco Corp. v.
Commissioner, supra.
In this case, repayment of the $200,000 advance and payment
of the consulting fee were contingent upon the fortunes of the
Corbin project. See Estate of Mixon v. United States, supra at
405; Segel v. Commissioner, 89 T.C. 816, 830 (1987). At the time
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