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1995. Nor is there evidence that petitioner and Mr. Tedford ever
demanded payment of interest.
This factor favors respondent’s position.
K. Ability of Border To Obtain Loans from Outside Lending
Institutes
“[T]he touchstone of economic reality is whether an outside
lender would have made the payments in the same form and on the
same terms.” Segel v. Commissioner, 89 T.C. 816, 828 (1987)
(citing Scriptomatic Inc. v. United States, 555 F.2d 364, 367 (3d
Cir. 1977)); see also Calumet Indus., Inc. v. Commissioner, 95
T.C. at 287.
Although, “the mere fact that a loan could not be obtained
from an unrelated source does not preclude the existence of a
bona fide loan,” Jack Daniel Distillery v. United States, 180 Ct.
Cl. 308, 332, 379 F.2d 569, 584 (1967), evidence that Border was
unable to obtain loans from outside lenders is an indication that
petitioner and Mr. Tedford’s transfers were capital investments.
Petitioner and Mr. Tedford’s financial support of Border through
the monetary transfers had no security or fixed payment terms and
was far more speculative than any transfers an outside party
would presumably make. See Fin Hay Realty Co. v. United States,
398 F.2d at 697; Dixie Dairies Corp. v. Commissioner, 74 T.C.
476, 497 (1980).
This factor favors respondent’s position.
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