- 39 - liability under the guaranties and not on protecting its equity investment in G�nther. The record in this case establishes that there was an identity of interest between petitioner’s role as creditor and as shareholder. This factor favors respondent’s position. j. Payment of Interest Only Out of Profits This factor is essentially the same as the third factor, the source of the payments. Hardman v. United States, 827 F.2d 1409, 1414 (9th Cir. 1987). It focuses, however, on how the parties to the advances treated interest. As we have stated, “A true lender is concerned with interest.” Id. at 605 (citing Estate of Mixon v. United States, 464 F.2d at 409). The failure to insist on interest payments indicates that the payors expect to be paid out of future earnings or through the increased market value of their equity interest. Am. Offshore, Inc. v. Commissioner, supra at 605 (citing Curry v. United States, 396 F.2d 630, 634 (5th Cir. 1968)). Although the intercompany account balance accrued interest, which was added to the yearend account balance reflected in the books and records of both petitioner and G�nther, G�nther did not, and financially could not, make any interest payments during FYE May 31, 1992, 1993, or 1994. Payment of the accrued interest was entirely dependent on profits that G�nther did not have andPage: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Next
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