Utah Code Ann. The trustee claims Ruffco violated this statute when it redeemed the promissory notes. While it is clear that the stock portion of the unit conveyed such an interest, there is no evidence that the note portion did the same. Simply because defendants obtained both instruments through one transaction does not make the two instruments the same. On the contrary, the stock certificates and the promissory notes conveyed different types of interests carrying different amounts of risk.
Various tests exist to determine whether a note constitutes a loan or equity.
The district court declined to apply that test, instead analyzing the notes under a multi-factored test used by circuit courts to decide whether an advance of money constitutes a loan for tax purposes. We agree with the district court that the tax cases are more relevant to this case. While the tax cases are not precisely on point, they deal with interests similar to those at issue here and, as such, guide our analysis. Under this test, the promissory notes appear to constitute debt. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel.