Jean I. Tedford - Page 20

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          Mr. Tedford knew the extent of Border’s financial problems and              
          knew that transferring funds to Border was risky.  Knowing all              
          this, petitioner and Mr. Tedford still chose to make the                    
          transfers.  Although the transfers were treated as debt in                  
          Border’s records, on the basis of the other factors, we do not              
          believe petitioner and Mr. Tedford intended, or could have                  
          reasonably intended, the transfers to be bona fide debt.                    
               This factor favors respondent’s position.                              
               H.  “Thin” or Adequate Capitalization                                  
               A monetary transfer to a corporation appears to be a capital           
          contribution if the corporation is thinly capitalized.  Am.                 
          Offshore, Inc. v. Commissioner, supra at 604.                               
               At trial Mr. Edge testified as to valuation of Border’s                
          assets.  Mr. Edge is not a certified appraiser, nor was he                  
          designated as an expert witness on construction equipment or                
          auctions; therefore, we disregard his testimony as to the                   
          valuation of Border’s assets.                                               
               There is evidence in the record from which an inference can            
          be drawn that Border’s capitalization was inadequate, such as               
          petitioner and Mr. Tedford’s continuous transfers of cash and               
          Border’s inability to get loans from outside creditors.                     
          Therefore, this factor favors respondent’s position.                        








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