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4. Right To Enforce the Payment of Principal and Interest
In determining whether petitioner intended to enforce
repayment of the advance, an essential element is whether a good-
faith intent on the part of the recipient of the funds to make
repayment and a good-faith intent on the part of the person
advancing the funds to enforce repayment exists. See Fisher v.
Commissioner, 54 T.C. 905, 909-910 (1970). We must consider
whether, under the facts and circumstances of this case, there
was a reasonable expectation of repayment in light of the
economic realities of the situation. See Jack Daniel Distillery
v. United States, 180 Ct. Cl. 308, 379 F.2d 569, 583 (1967)
(citing Irbco Corp. v. Commissioner, supra).
We are not convinced petitioner had a good-faith intention
of enforcing repayment. The testimony clearly indicated that Mr.
Magness did not have the means to repay petitioner unless the
Corbin properties sold. Petitioner understood Mr. Magness’
financial situation and did not intend to require repayment of
the advance unless and until the Corbin properties sold. Given
petitioner’s interest in the Corbin project, we do not believe he
would have demanded repayment if it would have imperiled the
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