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that argument was of little import because no demand for payment
was made.
3. Source of Repayments
If the expectation of repayment depends solely on the
success of the borrower's business, the transaction has the
appearance of a capital contribution. See In re Lane 742 F.2d
1311, 1314 (11th Cir. 1984); Estate of Mixon v. Commissioner,
supra at 405. An expectation of repayment solely from corporate
earnings is not indicative of a bona fide debt. See In re Lane,
supra at 1314. There has been no showing of any other source of
repayment other than the TLC’s business receipts.
4. The Right To Enforce Payments
A definite obligation to repay principal and interest favors
the existence of debt. See Stinnett’s Pontiac Serv., Inc. v.
Commissioner, supra at 639. Repayment that is within the
discretion of the parties and conditioned upon the occurrence of
certain events is more like equity. See id. Even where there is
a basic right to enforce payment, failure to take customary steps
to ensure payment-–such as securing the advance or establishing a
sinking fund-–may indicate an equity rather than debt
relationship. See In re Lane, supra at 1317.
J&J made no attempt to demand payment from TLC. Further,
J&J did not require security or a sinking fund. TLC had no
obligation to repay on a fixed schedule or by a certain date.
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