-35- approximately 2-1/2 years after HEI’s first transfer to ALSL and did so only on account of ALD’s claimed liquidation. Moreover, notwithstanding this lack of repayments throughout the referenced 2-1/2-year period, HEI continued to transfer funds to ALSL without any schedule for repayment. HEI even transferred a total of $95,000 to ALSL in 1997 even though in December 1996 HEI decided to stop funding the Seasons of Sarasota project and ALSL treated the “debt” as discharged on its Federal income tax return for 1996. Petitioners ask the Court to conclude that the issuance of the ALSL note as a demand note strongly supports a finding of debt because the obligeee of a demand note, unlike an equity holder, may at any time demand repayment. We decline to reach such a conclusion. As noted by the Court of Appeals for the Eleventh Circuit, “an unsecured note due on demand with no specific maturity date, and no payments is insufficient to evidence a genuine debt.” Stinnett’s Pontiac Serv., Inc. v. Commissioner, 730 F.2d at 638; cf. Bayer Corp. v. Mascotech, Inc. (In re Autostyle Plastics, Inc.), supra at 750 (“use of demand notes along with a fixed rate of interest and interest payments is more indicative of debt than equity” (Emphasis added.)). Repayment of the ALSL note was unsecured, HEI never prepared a written repayment schedule as to the transfers, and ALSL never had assets available to pay all, or even a significant part, ofPage: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Next
Last modified: May 25, 2011