Indmar Products Co., Inc. - Page 9

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          controlling or decisive by itself and the particular                        
          circumstances of each case must be considered by the court.  Roth           
          Steel Tube Co. v. Commissioner, supra at 630.  “These factors are           
          merely tools to be used in evaluating whether the transaction as            
          a whole was effected with a genuine intention to create a debt,             
          with a reasonable expectation of repayment, and within the                  
          economic realities of a debtor-creditor relationship.”  Recklitis           
          v. Commissioner, 91 T.C. 874, 905 (1988).                                   
          I.   The Rowes’ Objectives for Characterizing the Cash Transfers            
               as Debt                                                                
               The Rowes’ characterized the cash transfers as debt because            
          they wanted to receive a 10-percent return on their investment              
          and minimize estate taxes.  Mr. Rowe testified that they received           
          advice from numerous estate planners and decided to characterize            
          the transfers as loans because “we felt additional equity would             
          only hurt the family at our death.”  For nearly 12 of the 14                
          years, from 1987 to 2000, the 10-percent rate charged by the                
          Rowes was above the market and prime interest rates.  For                   
          example, in 1998 when the prime rate was 8.5 percent, petitioner            
          executed loan agreements with the Rowes and FTB at fixed rates of           
          10 and 7.5 percent, respectively.  Mr. Rowe testified,                      
          unconvincingly, that the higher rate charged by the Rowes                   

          Commissioner, 800 F.2d 625, 630-632 (6th Cir. 1986), affg. T.C.             
          Memo. 1985-58.                                                              

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