- 11 - debts of petitioner, payments on the debenture notes depended solely on future earnings of petitioner which put the debenture funds at an equal amount of risk as petitioner’s equity. Reliance, however, upon future earnings for payment of a purported debt generally does not cause the funds received by a corporation to be treated as equity. See J.S. Biritz Constr. Co. v. Commissioner, 387 F.2d 451, 458-459 (8th Cir. 1967), revg. T.C. Memo. 1966-227. Third-Party Loans Funds are more likely to be treated as debt if at the time the funds were received the corporation had credit available from outside sources. Am. Offshore, Inc. v. Commissioner, supra at 605 (citing Estate of Mixon v. United States, supra at 410). The evidence indicates that petitioner was successful in obtaining secured loans from outside creditors, and at no time was petitioner refused a loan from a third party. Management Participation Funds received by a corporation will be more likely treated as equity if, as a result of such receipt, the person transferring the funds had a right to participate in the management of the corporation. Am. Offshore, Inc. v. Commissioner, supra at 603.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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