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Although there were fixed dates for repayment, a factor that
favors petitioner’s position, any advantage to petitioner is
largely undercut by Crispin’s, Koehler’s, and petitioner’s
conduct. The circumstances and their actions show that they did
not believe, or could not have reasonably believed, the advances
would be repaid by the specified note maturity dates. See Fin
Hay Realty Co. v. United States, supra at 698 (noting that
although a purported corporate debtor issued demand notes for the
advances, the actual economic reality was that those notes would
not be repaid until some distant time in the future); Cuyuna
Realty Co. v. United States, 382 F.2d 298, 301-302 (1967)
(reasoning that an advance, though qualifying at the time made as
a valid debt for tax purposes, may later lose that status for
subsequent taxable years when the purported creditor ceases to
act like a reasonable creditor).
3. Source of the Repayment
If repayment is contingent upon earnings or is to come from
a restricted source, such as a judgment recovery, dividends, or
profits, an equity interest is indicated. Estate of Mixon v.
United States, supra at 405; Calumet Indus., Inc. v.
Commissioner, 95 T.C. 257, 287-288 (1990). In such a case, the
lender acts “‘as a classic capital investor hoping to make a
profit, not as a creditor expecting to be repaid regardless of
the company’s success or failure.’” Calumet Indus., Inc. v.
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