Edward L. Provost and Vicky L. Provost - Page 19




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          determine whether there is an identity of interest between the              
          two positions.  See American Offshore, Inc. v. Commissioner,                
          supra at 604-605.  If stockholders’ advances to a corporation are           
          in substantially the same proportion as their equity ownership in           
          the corporation, it tends to demonstrate that the advances are              
          more in the nature of equity.  See Estate of Mixon v. United                
          States, supra at 409.  “On the other hand, a sharply                        
          disproportionate ratio between a stockholder’s percentage                   
          stockholdings and debt is strongly indicative” that the alleged             
          debt is bona fide.  American Offshore, Inc. v. Commissioner, 97             
          T.C. at 604.                                                                
               In this case, Mr. Magness undertook the Corbin project                 
          ostensibly as a sole proprietor.  When petitioner advanced the              
          funds to Mr. Magness, petitioner had no existing ownership                  
          interest in the project.  Although we view the involvement of               
          petitioner in the Corbin project as being more in the nature of a           
          joint venture, the identity of interest usually examined by this            
          factor simply does not exist in this case.  Consequently, we do             
          not rely upon or apply this factor in making our analysis.                  
          10. Payment of Interest Only From Profits                                   
               “This factor is essentially the same as the third factor,              
          ‘the source of the payments.’”  Hardman v. United States, 827               
          F.2d 1409, 1414 (9th Cir. 1987).  It focuses, however, on how the           
          parties to the alleged debt treated interest.  As we have stated,           






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