- 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