Gerald L. and Erma L. Dunnegan - Page 10

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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.                 
               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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