- 10 - Extent to Which Funds Were Used To Acquire Capital Assets The record is unclear as to exactly for what purpose the debenture funds received by petitioner were used. A substantial portion of the debenture funds appears to have been used to acquire capital assets. Proportionality of Interest Funds received from shareholders in proportion to their respective stock ownership interests may indicate equity investments. Am. Offshore, Inc. v. Commissioner, supra at 604 (citing Estate of Mixon v. United States, supra at 409). Each of petitioner’s debenture holders was either a shareholder of petitioner or was related to a shareholder of petitioner. The debenture funds were transferred to petitioner by the debenture holders, not in exact proportion, but in comparable proportion to the respective stock interests of the debenture holders. Risk Petitioner’s obligation to repay the debenture funds was unconditional. Payments of principal and designated interest on the debenture notes were not dependent upon profits of petitioner, nor were payments excused or forgiven in the event petitioner sustained losses. Respondent argues that because the debenture notes were unsecured and subordinated to the securedPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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