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cash infusions and G�nther’s poor relationship with German banks
suggest inadequate capitalization. Although petitioner’s capital
contributions to G�nther in FYE May 31, 1985 and 1992, were
substantial, they were insufficient to staunch the flow of red
ink caused by G�nther’s negative cashflow.
For all relevant time periods, therefore, we conclude that
this factor favors respondent’s position.
i. The Identity of Interest Between Creditor
and Shareholder
At all relevant times, a member of the consolidated group
was G�nther’s sole shareholder. Advances made by a sole
shareholder are more likely to be committed to the risk of the
business (and hence indicative of an equity investment) than are
advances made by creditors who are not shareholders of the
corporation. Ga. Pac. Corp. v. Commissioner, 63 T.C. 790, 797
(1975). The sole shareholder is also less likely to be concerned
than a third party would be with the safeguards normally used to
protect such advances. Id. Petitioner’s status as sole
shareholder obviously leads to an identity of interest which,
respondent argues, strongly indicates an equity investment.
Petitioner argues that its greater involvement in G�nther’s day-
to-day management after G�nther’s financial difficulties became
apparent shows that it was more interested in protecting its
interests as a creditor; i.e., its focus was on minimizing its
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