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are willing to assume that $89,728.73 was applied for the benefit
of LINKS. Conversely, the record fails to trace the remaining
$84,404.47 canceled to any use benefiting LINKS.
Furthermore, the evidence shows that the amounts supplied by
Mr. Combrink to LINKS, both through COST and from personal
sources, were initially characterized as debt, not equity. Mr.
Combrink owned 100 percent of the outstanding LINKS stock prior
to any such remittances and did not at the time of these loans to
LINKS receive any additional shares or equity. Only subsequently
was $175,000.00 of the $252,481.03 once represented by promissory
notes from LINKS to Mr. Combrink redesignated as additional paid-
in capital. Although we are willing in these circumstances to
accept this recapitalization as establishing that $175,000.00 was
used to acquire LINKS stock within the meaning of section
304(b)(3)(B)(i), $77,481.03 still remained outstanding in the
form of debt. Since the $89,728.73 portion of the assumed
liability that can be traced to LINKS exceeds this $77,481.03
that clearly was intended to represent debt rather than equity in
LINKS by only $12,247.70, we are able to determine from the
record only that $12,247.70 of the $174,133.20 assumed by COST
was used to acquire stock or equity in LINKS.
As to this $12,247.70 amount, we hold that petitioners are
entitled to the section 304(b)(3)(B) exception. With respect to
the remaining $161,885.50, petitioners have failed to carry their
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