- 161 -
advances made by EPIC were not allowed on the ground that
any such interest expenses were not paid or accrued on
bona fide indebtedness. Respondent cites Hambuechen v.
Commissioner, 43 T.C. 90 (1964), and invites the Court
to test whether the advances in this case are valid
indebtedness in accordance with the holding of that case.
Hambuechen involved an advance of money to a partnership
by a limited partner. In that case, we noted that the
question whether a transaction created a debtor-creditor
relationship for tax purposes is a question of fact. See
id. at 98. We applied the same factual analysis used to
resolve debt-equity issues in the context of a corporation
and its stockholders, and we held that the subject advance
constituted a capital contribution, rather than a loan.
See Kingbay v. Commissioner, 46 T.C. 147, 154-155 (1966).
Petitioners argue that the advances in this case
constitute bona fide indebtedness rather than equity. In
support of that argument, petitioners review each of the
13 factors that were taken into account by the court in
Estate of Mixon v. United States, 464 F.2d 394, 402 (5th
Cir. 1972), in determining whether the advances in that
case constituted debt or equity. Those factors are the
following:
Page: Previous 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 NextLast modified: May 25, 2011