Flint Industries, Inc. and Subsidiaries - Page 35




                                       - 35 -                                         
          two ways.  First, petitioner caused G�nther to distribute the net           
          proceeds from the Actium transaction as part payment to the banks           
          and trade creditors to whom G�nther was liable, but no part of              
          the proceeds was used to repay the intercompany account balance.            
          Second, when petitioner waived portions of G�nther’s intercompany           
          account balance, it effectively subordinated the intercompany               
          account balance to other creditors.                                         
               Subordination of the advances strongly indicates equity.               
          This factor favors respondent’s position.                                   
                    g.  Intent of the Parties                                         
               “[T]he inquiry of a court in resolving the debt-equity issue           
          is primarily directed at ascertaining the intent of the parties”.           
          A.R. Lantz Co. v. United States, 424 F.2d 1330, 1333 (9th Cir.              
          1970) (citing Taft v. Commissioner, 314 F.2d 620 (9th Cir. 1963),           
          affg. in part and revg. in part T.C. Memo. 1961-230).  Before the           
          waivers of portions of the intercompany account balance owed to             
          petitioner by G�nther, both companies treated the intercompany              
          account balance as debt in that the outstanding account balance             
          accrued interest.  The intercompany account balance was recorded            
          as an account payable by G�nther and an account receivable by               
          petitioner on their respective financial statements.                        
               Although petitioner treated the intercompany account balance           
          as debt on its books and records and referred to the account                
          balance as a debt owed to it by G�nther, it is obvious that                 







Page:  Previous  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  Next

Last modified: May 25, 2011