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during the years in issue, an oral agreement existed between
petitioner and Mr. Henderson for him to advance funds to the
corporation and for the corporation to pay his personal expenses.
Accordingly, we hold that there was no oral agreement between
petitioner and Mr. Henderson and that petitioner has failed to
show that amounts withdrawn from the corporation to pay Mr.
Henderson’s personal expenses were pursuant to a “trust”
arrangement.
Petitioner argues in the alternative that the corporation’s
payment of Mr. Henderson’s personal expenses represented
repayments of loans made between the two parties. Respondent
argues that any funds advanced by Mr. Henderson were
contributions to capital and any payment of Mr. Henderson’s
personal expenses constitutes the payment of wages to an
employee.
In resolving the question of whether a payment is debt or
equity for Federal tax purposes, each case must be decided on its
own facts. Calumet Indus., Inc. v. Commissioner, 95 T.C. 257,
285 (1990).
Courts have identified and considered various factors in
determining whether a payment is debt or equity. Some of the
factors considered are: The names given to the certificates
evidencing the indebtedness, presence or absence of a fixed
maturity date, source of payments, right to enforce payments,
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