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I. The Identity of Interest Between Creditor and
Shareholder
This factor generally compares the equity ownership of
stockholders with their position as creditors in order to
determine whether there is an identity of interest between the
two positions. See Am. Offshore, Inc. v. Commissioner, supra at
604-605.
Mr. Tedford was the sole shareholder of Border; therefore,
this factor does not exist in this case. Consequently, we do not
rely upon or apply this factor in making our analysis.
J. Source of Interest Payments
This factor is essentially the same as the third factor, the
source of the payments. Hardman v. United States, 827 F.2d 1409,
1414 (9th Cir. 1987). It focuses, however, on how the parties
treated interest. As we have stated, “a true lender is concerned
with interest.” Estate of Mixon v. United States, supra at 409.
When shareholders transfer sums to a corporation and do not
insist that the corporation make interest payments, it indicates
that the shareholders expect to be paid out of future earnings or
through the increased market value of their equity interest.
Am. Offshore, Inc. v. Commissioner, 97 T.C. at 605 (citing Curry
v. United States, 396 F.2d 630, 634 (5th Cir. 1968)).
Border did not, and probably financially could not, make any
interest payments to petitioner and Mr. Tedford during 1994 or
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