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and, thus, the recordation of the loan was merely a bookkeeping
entry that is of little significance.
There was no fixed repayment schedule, and petitioners did
not produce a record of the repayments. Additionally, the
repayment of petitioners’ transfers depended upon Auto Plaza’s
financial success, and the lack of repayment indicates that the
transfers did not constitute bona fide loans. See Stinnett’s
Pontiac Serv., Inc. v. Commissioner, 730 F.2d 634, 639 (11th Cir.
1984), affg. T.C. Memo. 1982-314. “If the expectation of
repayment depends solely on the success of the borrower’s
business, the transaction has the appearance of a capital
contribution.” Roth Steel Tube Co. v. Commissioner, 800 F.2d
625, 631 (6th Cir. 1986), affg. T.C. Memo. 1985-58.
Petitioners never demanded repayment of the transfers, and
their continued lending of additional funds tends to refute the
existence of a valid debtor-creditor relationship between Auto
Plaza and petitioners with regard to the funds transferred to
Auto Plaza. See, e.g., Boatner v. Commissioner, T.C. Memo. 1997-
379, affd. without published opinion 164 F.3d 629 (9th Cir.
1998).
Auto Plaza tried to obtain financing from banks but could
not obtain financing on the same terms as the funds provided by
petitioners. Where the banks would have required a personal
guaranty from petitioners, Auto Plaza did not give any security
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