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The promissory note set forth a fixed schedule for repayment
with a default provision requiring immediate payment of both
principal and interest. However, the record indicates petitioner
did not make any payments to NCPL and NCPL never attempted to
collect the amount owing after each default. Petitioner testified
that NCPL did not require him to comply with any fixed terms or
require him to make any payments until the characterization of the
advances was determined.
Furthermore, petitioner produced no documentation showing
that a fixed schedule was established to repay the $249,193 TPPL
transferred to SSI in 1998 for the development of the Rivercliff
property or the total of $92,250 NCPL transferred to petitioner
for the Rivercliff property’s farm operating expenses in 1998,
2001, and 2002.
This factor indicates the parties did not intend to establish
a debtor-creditor relationship at the time the funds were
advanced.
4. Whether the Borrower Had a Reasonable Prospect of
Repaying the Loan and Whether the Lender Had
Sufficient Funds To Advance the Loan
This factor is best determined by looking to whether there
was “a reasonable expectation of repayment in light of the
economic realities of the situation” at the time the funds were
advanced. Fisher v. Commissioner, supra at 910. A reasonable
prospect of repayment at the time the funds were advanced
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