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13. The Failure of the Debtor To Repay on the Due Date
This factor is the most telling of the Mixon factors. See
In re Lane, 742 F.2d at 1317. Except for a token $5,000
repayment at the end of 1993, Gandy’s repaid none of the
advances, nor did petitioner ever demand repayment. We conclude
that petitioner never intended to compel repayment of the
advances. Cf. Stinnett’s Pontiac Serv., Inc. v. Commissioner,
supra at 640.
This factor weighs strongly toward equity.
Conclusion
In light of the foregoing, we conclude and hold that
petitioner’s advances to Gandy’s were capital contributions and
not bona fide debt. Therefore, petitioner may not deduct the
advances as bad debts under section 166.
D. Characterization of Petitioner’s Losses as Ordinary or
Capital
Petitioners argue that even if petitioner’s advances to
Gandy’s constituted capital contributions rather than bona fide
indebtedness, they are nevertheless entitled to claim ordinary
losses under section 165 rather than the capital losses to which
respondent has conceded they are entitled, because petitioner was
in the business of lending money and because his initial
involvement with Gandy’s came in furtherance of his business
rather than as an investment. In support of their position,
petitioners cite W.W. Windle Co. v. Commissioner, 65 T.C. 694
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