- 13 -
payment of principal and designated interest set forth by the
debenture notes were honored by petitioner.
The debenture holders’ expectation of repayment at the time
the debenture notes were executed was reasonable because the
debenture holders had an understanding and knowledge of
petitioner’s business and a reasonable expectation of its likely
success. For 1993 through the time of trial in 2002, petitioner
timely made the principal and designated interest payments due on
the debenture notes, and a majority of the objective factors
indicate that a debtor-creditor relationship existed between
petitioner and the debenture holders with regard to the debenture
funds.
We conclude that petitioner properly treated the $1,337,500
in debenture funds as debt. For 1996, petitioner is entitled to
an interest deduction for the $93,746 it paid as interest on the
debenture notes.
To reflect the foregoing,
Decision will be entered
for petitioner.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13
Last modified: May 25, 2011