-65-
Decedent did not establish any fund to repay the promissory
notes.
This factor weighs toward a finding that decedent’s use of
the funds of the LRFLP did not create bona fide debt.
xii. Conclusion
On the basis of our review of the record in light of the
relevant factors,24 we find it extremely improbable that an arm’s-
length lender at the time of each use of the funds of the LRFLP
would have lent unsecured, at a low rate of interest, and for an
unspecified period to an individual in decedent’s financial
condition and with decedent’s weakened health. Security,
adequately stated interest, and repayment arrangements (or
efforts to secure the same) are important proofs of intent, and
such proofs are notably lacking here. Economic realities require
that decedent’s use of the funds of the LRFLP be characterized as
distributions to decedent, and we so hold.
5. Effect of Section 2035(a)
Petitioners next argue that the Court, if we conclude that
the assets are includable in decedent’s gross estate under
section 2036(a)(1), must exclude from those assets the portion
24 In addition to the factors mentioned above, we note that
no contemporaneous records were kept as to the payments other
than the recordings in the checkbook registers. We consider the
lack of more formal documentation to be especially notable given
that decedent’s son-in-law prepared and kept detailed
documentation for all of the gifts before 1995.
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