Opinion ID: 162075
Heading Depth: 5
Heading Rank: 1

Heading: the value of the collateral

Text: 58 With respect to the taxpayers' first point, we agree with the district court's reasoning that the value of the collateral at the time of the purported loan is hardly dispositive. The nature of the arrangement — and specifically the interaction of Sections 7.5 and 10.2, as discussed next — eclipse any support provided by the taxpayers' first point, even on a motion for summary judgment. The taxpayers acknowledge that the purpose in looking at the value of the collateral is whether there was incentive for the borrowing party to repay the note. See Aplts' Br. at 40. However, as discussed below, the incentives were clearly against repayment of the note, and thus a consideration of the value of the collateral is of little help to the taxpayers' position. Indeed, the very case relied upon by the taxpayers for this point, Saviano v. Commissioner, 765 F.2d 643 (7th Cir.1985), states that `in a true lending transaction, there exists the reasonable likelihood that the lender will be repaid in the light of all reasonably foreseeable risks. ' Id. at 646 (quoting Gibson Products Co. v. United States, 637 F.2d 1041, 1047 (5th Cir.1981)) (emphasis added). As discussed below, there was apparently no likelihood of any such repayment — thus, Saviano 's reasoning suggests that the value of the collateral is relatively inconsequential in proving the transaction was a loan. 59