Frederick H. Jackson III and Pamela S. Jackson - Page 17




                                       - 17 -                                         
               C.  Discussion                                                         
               To persuade us that the corporation lacked borrowing power,            
          petitioners’ claim:  “The Corporation was undercapitalized, the             
          loans were utilized exclusively to purchase capital assets and              
          the corporation did not have the capacity to repay the loans.”              
          Certainly, petitioners have addressed certain factors pertinent             
          to debt-equity analysis.  Nevertheless, they have failed to                 
          persuade us that the intent of the parties to the loans was other           
          than to create indebtedness of the corporation and that there               
          were not genuine and realistic prospects of repayment by the                
          corporation.  See Santa Anita Consol., Inc. v. Commissioner,                
          supra.                                                                      
               If intent is to be divined from actions, then the actions of           
          the parties to the loans unequivocally signify the intent to                
          create an indebtedness of the corporation.  The loan agreement,             
          note, and mortgage all appear to be standard, form documents                
          intended to create, or secure, indebtedness of the named                    
          borrower, viz, the corporation.  The guaranty agreement also                
          appears to be a standard, form document.  The parties have                  
          stipulated that petitioner and his father were guarantors of the            
          loan agreement.  The language in the guaranty agreement that                
          petitioner, “as a primary obligor”, guarantees the corporation’s            
          obligations, may have been intended to create in petitioner (and            
          his father) joint and several liability with the corporation for            






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011