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Applying the above factors, we find that the advance made by
James to Quotum was a capital contribution and not a bona fide
loan. In exchange for the advance of $650,000, James received
both a stock certificate, issued in the name of his closely held
corporation, Candid, for 125 shares of Quotum’s stock, and what
purports to be a promissory note allegedly signed by Brian Wilcox
and Michael Donnelly. The promissory note did not contain an
interest provision nor was it secured; in fact, it appears from
this sparse record that there was no security to offer. The
advance was not made to Brian Wilcox and Michael Donnelly
personally but, instead, was made directly into Quotum’s bank
account at Nordbanken. As further consideration for the advance,
James was elected president of Quotum.
On the record before us, it does not appear that Quotum had
any capital other than that provided by James. Although the
promissory note on which petitioners rely had a fixed maturity
date enabling James to demand payment at any time thereafter, it
does not appear that Quotum had any source of repayment available
other than the funds provided by James. The financial status of
the two alleged debtors, Brian Wilcox and Michael Donnelly, is
not in the record, except insofar as it has been established that
Donnelly filed a bankruptcy petition in September 1992. It does
not appear that Quotum had any ability to obtain credit from
outside sources. Although some of the money advanced by James
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