- 98 -
Commissioner, supra at 287-288 (quoting In re Larson, 862 F.2d
112, 117 (7th Cir. 1988)). Likewise when circumstances make it
impossible to estimate when an advance will be repaid because
repayment is contingent upon future profits, or repayment is
subject to a condition precedent, or where a condition may
terminate or suspend the obligation to repay, an equity
investment is indicated. Affiliated Research, Inc. v. United
States, 173 Ct. Cl. 338, 351 F.2d 646, 648 (1965).
At trial, Koehler was questioned about petitioner’s 1995 and
1996 advances to Cap Corp. He indicated that, by causing
petitioner to make the advances, Crispin was “rolling the dice”
because repayment depended on Cap Corp.’s making sales,
especially through CKS, its subsidiary. After the debt
conversion, Cap Corp.’s serious financial problems continued and
its earnings capacity also dramatically declined because CKS was
no longer a source of earnings.
Accordingly, as to the source of repayment, this factor
favors respondent.
4. The Right To Enforce the Payments
The right to enforce the repayment residing in the entity
making the advance is indicative of bona fide debt. Estate of
Mixon v. United States, 464 F.2d at 405.
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