Larry M. Levy and Diane Levy - Page 9

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          Levy received no compensation for his services to JTFJ and Diane            
          Levy’s wages were very small in comparison to the amount of the             
          loans guaranteed.  See id. at 98-99 (considering the amount of              
          salary to be protected in relation to the amount advanced).                 
          Petitioners’ guaranty payments (i.e., $1,000 in 1988, $37,095 in            
          1989, $53,806 in 1990, $93,725 in 1992, and $13,800 in 1993) were           
          made with a profit motive, the agreements were legally                      
          enforceable against petitioners, and the guaranties were,                   
          however, made before the obligations became worthless.  See sec.            
          1.166-9(d), Income Tax Regs.  The guaranty payments were                    
          worthless when made.  Petitioners made only $93,725 of guaranty             
          payments during the years in issue, all during 1992. Accordingly,           
          petitioners are not entitled to deduct the guaranty payments in             
          1991.  Petitioners, however, are entitled to deduct $93,725 as a            
          1992 nonbusiness bad debt.                                                  
               b.   The Advances                                                      
               To determine whether a payment is a loan or a contribution             
          to capital, numerous factors are considered.  See Dixie Dairies             
          Corp. v. Commissioner, 74 T.C. 476, 493 (1980); see also Bauer v.           
          Commissioner, 748 F.2d 1365, 1368 (9th Cir. 1984) (stating that             
          11 factors are considered), revg. T.C. Memo. 1983-120.  No                  
          individual factor is controlling, and the determination of                  
          whether advances are loans or contributions to capital requires             

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