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