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could get loans or other financing from third parties.
Petitioners did not show that anyone else was willing to advance
funds to Cabana Boy. Cabana Boy had little success obtaining
financing from third parties. This factor favors respondent.
11. Subordination
Subordination of repayment of an advance to other
indebtedness suggests that the advance is equity. See Estate of
Mixon v. United States, supra at 406; United States v. Henderson,
375 F.2d 36, 40 (5th Cir. 1967). Petitioners point out that
there is no evidence that there were any subordination
agreements. However, even if there were no subordination
agreements, timely payment by the alleged debtor to other
creditors while not repaying advances effectively subordinates
the advances to the rights of the other creditors who receive
payment in the interim. See American Offshore, Inc. v.
Commissioner, 97 T.C. at 603; Inductotherm Indus., Inc. v.
Commissioner, T.C. Memo. 1984-281, affd. without published
opinion 770 F.2d 1071 (3d Cir. 1985). Cabana Boy paid its
creditors, but it never repaid petitioners and petitioners never
asked to be repaid. Thus, petitioners effectively subordinated
their advances to those of other corporate creditors. This
factor favors respondent.
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