Philip A. Sellers - Page 17




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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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