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on June 1, 1992, because, as both petitioner and Mr. Magness
testified, payment was due only when the Corbin properties were
sold. This factor favors respondent’s position.
7. Intent of the Parties
“[T]he inquiry of a court in resolving the debt-equity issue
is primarily directed at ascertaining the intent of the parties”.
A.R. Lantz Co. v. United States, 424 F.2d at 1333 (citing Taft v.
Commissioner, 314 F.2d 620 (9th Cir. 1963)). In Taft the court
held that an advance constituted indebtedness where the parties
executed a "promissory note", the taxpayer’s right to enforce
payment of the note and the obligation to pay was positive and
unconditional, the note was not subordinated to any other
indebtedness, there was no change in proportionate equity
interest or voting power in the corporation, and repayment of the
note was not contingent upon earnings. The parties in Taft
intended the advance to be indebtedness, and the advance was
carried on the books as a long-term debt. As payments were made
over the years, the indebtedness was reduced on the books of the
corporation. The note was paid in full.
In this case, Mr. Magness never made a single payment on the
alleged debt, nor did he attempt to pay petitioner his $40,000
consulting fee. Moreover, there is no evidence that the debt was
carried as indebtedness on the books of the Corbin project;
indeed, the record contains no evidence that any such books
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