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repayment was in some way tied to the fortunes of the business,
indicative of an equity advance.” Estate of Mixon v. United
States, supra at 404; Anchor Natl. Life Ins. Co. v. Commissioner,
supra at 405.
The January 1, 1995, and December 1, 1996, promissory notes
specified November 30, 1996 and 1997, respective payment dates.
Sometime before October 1996, however, Crispin and Koehler
realized that Cap Corp. was insolvent and would not be able to
repay the outstanding advances. They thus began the planning of
a debt conversion transaction to relieve Cap Corp. of
substantially all of its outstanding obligations to petitioner.
Under the plan, petitioner was to be repaid only a small
portion of the total outstanding advances. Notwithstanding the
uncertainty of repayment, petitioner advanced an additional
$443,657 to Cap Corp. between October 31 and November 30, 1996.
On December 2, 1996, in the conversion transaction, Cap Corp. was
relieved of the obligation to repay $2.259 million. The
remaining $500,000 was rolled over into the December 1, 1996,
promissory note. Cap Corp. remained insolvent even after the
December 2, 1996, debt conversion transaction, and its potential
for earnings was greatly reduced after it parted with the CKS
stock. In spite of these circumstances, petitioner advanced an
additional $1.257 million to Cap Corp. during 1997.
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