-59-
repayment was within the discretion of decedent’s children and
was not conditioned upon the occurrence of any stated event. See
id.; see also Busch v. Commissioner, 728 F.2d at 951.
This factor weighs toward a finding that decedent’s use of
the funds of the LRFLP did not create bona fide debt.
iii. 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 Stinnett’s Pontiac Serv., Inc.
v. Commissioner, supra 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 Roth Steel Tube Co. v. Commissioner, supra at 631.
Although each of the promissory notes bore interest, the
facts of this case persuade us that the parties thereto did not
intend that decedent during her lifetime actually pay any (let
alone a market rate of) interest for the use of the funds of the
LRFLP. We do not believe that a reasonable lender would have
lent the funds to decedent, an elderly, infirm woman with minimal
assets in her name, at the rate of interest stated in the
promissory notes and with the intent to be repaid only after her
death. A transferor of funds who does not insist on reasonable
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