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input into the project to make sure that they would be
successful.”
Respondent contends the $40,000 consulting fee was a
handsome profit on petitioner’s $200,000 investment, and the
agreement was indicative of a joint venture. We agree that
petitioner’s participation in the Corbin project and his
relationship with Mr. Magness more closely resembled a joint
venture than a debtor-creditor relationship. This factor favors
respondent’s position.
6. Status Equal to or Inferior to that of Regular Creditors
Whether an advance is subordinated to regular creditors
bears on whether the taxpayer was acting as a creditor or an
investor. See Estate of Mixon v. United States, 464 F.2d at 406.
In addition, “Failure to demand timely repayment effectively
subordinates the intercompany debt to the rights of other
creditors who receive payment in the interim.” American
Offshore, Inc. v. Commissioner, supra at 603 (citing Inductotherm
Indus., Inc. v. Commissioner, T.C. Memo. 1984-281, affd. without
published opinion 770 F.2d 1071 (3d Cir. 1985)).
Mr. Magness continued to pay other creditors in lieu of
petitioner after June 1, 1992, the date when petitioner was
entitled to repayment of the $200,000 advance, plus interest,
under the promissory note and to payment of the consulting fee
under the Contract. Petitioner did not demand or expect payment
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