- 95 -
Cap Corp. issued promissory notes as evidence of the 1995
through 1997 advances. The record also reveals that Crispin and
Koehler effectively were the parties to all documents and
transactions. All of Cap Corp.’s outstanding shares were held by
Crispin and Koehler. Crispin and Koehler were also close,
longtime business associates and friends. Crispin was CMA’s 98-
percent shareholder and ultimate decision maker. Where, as here,
the corporate “debtor” is closely held and related to its
“creditor”, the form of the transaction and the labels used by
the parties may lessen the probative quality of evidence. In the
setting we consider, Crispin and Koehler were able to manipulate
the transactions and create whatever appearance would be of
benefit to them or the structured activities. See Fin Hay Realty
Co. v. United States, 398 F.2d 694, 697 (3d Cir. 1968); Anchor
Natl. Life Ins. Co. v. Commissioner, supra at 406-407. Moreover,
by 1995, Cap Corp. had serious insolvency problems and an abiding
need for operating funds from petitioner.
Although the documents were cast as notes, the form is
largely offset by the lack of arm’s-length parties and Cap
Corp.’s apparent inability to repay the advances.
2. Presence or Absence of a Fixed Maturity Date
“The presence of a fixed maturity date indicates a fixed
obligation to repay, a characteristic of a debt obligation. The
absence of the same on the other hand would indicate that
Page: Previous 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 NextLast modified: May 25, 2011