-36-
the ALSL note. Whether or when to make demand for repayment of
the transfers was within the discretion of HEI and was not
conditioned upon the occurrence of any stated event. See
Stinnett’s Pontiac Serv., Inc. v. Commissioner, supra at 639.
This factor weighs toward a finding that the transfers did
not create bona fide debt.
3. Interest Rate and Actual Interest Payments
A reasonable lender is concerned about receiving payments of
interest as compensation for, and commensurate with, the risk
assumed in making the loan. See id. at 640; cf. Deputy v. du
Pont, 308 U.S. 488, 498 (1940) (in the business world, interest
is paid on debt as “compensation for the use or forbearance of
money”). The absence of an adequate rate of interest and actual
interest payments weighs strongly against a finding of bona fide
debt. See Bayer Corp. v. Mascotech, Inc. (In re Autostyle
Plastics, Inc.), supra at 750; Roth Steel Tube Co. v.
Commissioner, supra at 631.
Although the ALSL note on its face bore a rate of interest,
the facts of this case persuade us that the parties to the note
did not intend that ALSL actually pay HEI any (let alone a market
rate of) interest for the use of the transferred funds unless the
Seasons of Sarasota project was successful. We do not believe
that a reasonable lender would have lent unsecured funds to ALSL,
a company with no revenues and few liquid assets, at the rate of
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