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This factor is neutral, and we give it no weight.13
10. Source of Interest Payments
“[A] true lender is concerned with interest.” Curry v.
United States, 396 F.2d 630, 634 (5th Cir. 1968). Failure of the
putative lender to insist on interest payments suggests that he
is instead interested in the future earnings of the corporation
or increased market value of his ownership interest, thereby
indicating equity contributions. See Stinnett’s Pontiac Serv.,
Inc. v. Commissioner, supra at 640. Petitioner never demanded,
and Gandy’s never made, interest payments on the advances.
This factor weighs toward equity.
11. Ability To Obtain Funds From Outside Lenders
If a party receiving an advance can borrow funds from
another lender in an arm’s-length transaction on similar terms,
the advance may appear to be debt. See Electronic Modules Corp.
v. United States, 695 F.2d 1367, 1370 (Fed. Cir. 1982); Estate of
Mixon v. United States, supra at 410. Petitioner alleges to have
made completely unsecured loans to Gandy’s at a time when all its
assets were completely leveraged and when it was deeply
13 To the extent that petitioner, as majority shareholder
and father of the sole minority shareholder, controlled the
corporations that held ownership interests in Gandy’s (and there
is no evidence to the contrary), we could also conclude that
there was identity of interest between petitioner and the other
shareholders–-a factor that would weigh strongly toward treating
the advances as equity. Cf. Plantation Patterns, Inc. v.
Commissioner, 462 F.2d 712, 722 (5th Cir. 1972).
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