CMA Consolidated, Inc. & Subsidiaries, Inc. - Page 17

                                       - 106 -                                        
          that a purported lender expects to be paid out of future earnings           
          or through an increased market value of its equity interest.  Id.           
          at 605 (citing Curry v. United States, 396 F.2d 630, 634 (5th               
          Cir. 1968)).                                                                
               Although the Cap Corp. promissory notes provided that                  
          accruals of interest be added to the outstanding balance, Cap               
          Corp. did not make and was not financially capable of making                
          interest payments after August 1995.  Payment of accrued interest           
          depended entirely on profits that Cap Corp. did not have and was            
          not likely to earn in the future.                                           
               This factor favors respondent.                                         
          11.  Ability To Obtain Loans From Outside Lending                           
          Institutions                                                                
               “[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)).  A corporation’s ability to borrow from outside            
          lending institutions gives the transaction the appearance of a              
          bona fide debt and indicates that the purported creditor acted in           
          the same manner toward the corporation as ordinary reasonable               
          creditors would have acted.  Hardman v. United States, supra                
          (citing Estate of Mixon v. United States, supra at 410).                    








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