-42-
This factor weighs toward a finding that the transfers did
not create bona fide debt.
9. Subordination
Subordination of purported debt to the claims of other
creditors weighs against a finding of bona fide debt. See Roth
Steel Tube Co. v. Commissioner, 800 F.2d at 631-632; Stinnett’s
Pontiac Serv., Inc. v. Commissioner, supra at 639; Raymond v.
United States, 511 F.2d at 191; Austin Village, Inc. v. United
States, supra at 745.
ALSL has never had any creditors. Given that the transfers
were unsecured, however, their right to repayment would have been
subordinate to the interests of any secured creditors.
This factor is either inapplicable or does not support a
finding that the transfers created bona fide debt.
10. Use of Funds
A transfer of funds to meet the transferee’s daily business
needs weighs toward a finding of debt. A transfer of funds to
purchase capital assets weighs against a finding of bona fide
debt. See Roth Steel Tube Co. v. Commissioner, supra at 632;
Stinnett’s Pontiac Serv., Inc. v. Commissioner, supra at 640;
Raymond v. United States, supra at 191.
The transfers were not used to pay ALSL’s daily operating
expenses because ALSL had no operating expenses. Although the
transfers also were not used to acquire tangible capital assets,
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