- 13 - are not present in the advances to TLC and do not support an intention by J&J to collect on the advances. 9. The Use to Which the Advances Were Put Use of advances to meet the daily operating needs of the corporation, rather than to purchase capital assets, is indicative of bona fide indebtedness. See Stinnett’s Pontiac Serv., Inc. v. Commissioner, 730 F.2d at 640; Raymond v. United States, 511 F.2d at 191; Estate of Mixon v. Commissioner, 464 F.2d at 410. The advanced funds were used to pay the operating expenses of TLC. Accordingly, this factor favors petitioners’ position. 10. The Failure of the Debtor To Repay The absence of payments of principal or interest is a strong indication that the advances were capital contributions rather than loans. See Stinnett’s Pontiac Serv., Inc. v. Commissioner, supra at 640; Raymond v. Commissioner, supra at 191; Austin Village, Inc. v. United States, 432 F.2d 741, 745 (1970). It is undisputed that TLC never made a payment over the 4-year period when it received funds from J&J, nor did J&J make any demand for payment. Accordingly, it appears that J&J never intended to compel repayment of the advances. 11. The Risk Involved in Making The Advances The absence of security for the advances indicates that the advances were more likely capital contributions. See In re Lane,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011