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furtherance of his trade or business of lending money, in order
to make Gandy’s profitable so as to help his investment banking
business prosper. The objective facts in the record, however, do
not support the conclusion that these advances were made in a
manner consistent with normal lending practices or consistent
with petitioner’s own practices in making loans to other,
unrelated borrowers. Although petitioner testified that he
intended the advances to be repaid, the record does not reveal
that he made any efforts to collect principal or interest on the
advances over a period of 2 to 3 years. Petitioner was aware of
Gandy’s perilous financial situation when he first made the
advances in issue and could not realistically have expected to be
repaid, especially in light of Gandy’s delinquency on the Gandy’s
bonds, to which his advances were subordinated. He acknowledged
that he made the 1990 advances on an unsecured basis at a time
when Gandy’s needed the advances to operate. He made three
further unsecured advances in 1993, without having received or
requested repayment of the overdue 1990 advances, and in two
instances without receiving any kind of debt instrument.
This factor weighs toward equity.
8. Thin or Adequate Capitalization
Advances to corporations are generally indicative of equity
where the corporation is thinly capitalized (i.e., has a high
ratio of debt to equity). See Stinnett’s Pontiac Serv., Inc. v.
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