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Commissioner, 97 T.C. 579, 602 (1991). The absence of a fixed
maturity date or repayment schedule may indicate a contribution
to capital rather than a loan. See Stinnett’s Pontiac Serv.,
Inc. v. Commissioner, supra; Estate of Mixon v. United States,
supra at 404; American Offshore, Inc. v. Commissioner, supra at
602.
Five out of seven of petitioner’s advances to Gandy’s had no
fixed maturity date and no repayment schedule. The notes
reflecting the other two advances had 1-year maturity dates, but
the significance of this factor is diminished by Gandy’s failure
to make repayments in accordance with the maturity dates and
petitioner’s failure to make any efforts to collect.
This factor weighs against a bona fide debtor-creditor
relationship.
3. Source of the Payments
Repayment that depends on corporate earnings has the
appearance of a contribution to capital. See Estate of Mixon v.
United States, supra at 405; see also Stinnett’s Pontiac Serv.,
Inc. v. Commissioner, supra at 638-639. Gandy’s controller
testified that repayment of the advances from petitioner was
contingent on the company’s making a profit. Similarly,
petitioner testified that in order for his advances to be repaid,
Gandy’s had to operate successfully.
This factor weighs toward equity.
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