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addition, “Failure to demand timely repayment effectively
subordinates the intercompany debt to the rights of other
creditors who receive payment in the interim.” Am. Offshore,
Inc. v. Commissioner, supra at 603 (citing Inductotherm Indus.
Inc. v. Commissioner, T.C. Memo. 1984-281, affd. without
published opinion 770 F.2d 1071 (3d Cir. 1985)).
Petitioner and Mr. Tedford obtained no security interest in
Border’s assets, whereas SunWest demanded such security. Border
paid all of its other creditors while never making any payments
of principal or interest to petitioner and Mr. Tedford. When
Border ceased operation the proceeds from its liquidation auction
went first to paying off the loan it had with SunWest; none of
the proceeds were used to repay petitioner.
This factor favors respondent’s position.
G. Intent of the Parties
“[T]he inquiry of a court in resolving the debt-equity issue
is primarily directed at ascertaining the intent of the parties”.
A.R. Lantz Co. v. United States, 424 F.2d 1330, 1333 (9th Cir.
1970) (citing Taft v. Commissioner, 314 F.2d 620 (9th Cir. 1963),
affg. in part and revg. in part on another ground T.C. Memo.
1961-230).
Mr. Tedford had invested great amounts of time, work, and
money into making Border successful. Border was Mr. Tedford’s
livelihood, and he wanted to keep Border running. Petitioner and
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