Opinion ID: 2973623
Heading Depth: 4
Heading Rank: 3

Heading: Fixed Maturity Date and Schedule of Payments

Text: “The absence of a fixed maturity date and a fixed obligation to repay indicates that the advances were capital contributions and not loans.” Roth Steel, 800 F.2d at 631. Based on the Rowes’ waivers, the Tax Court concluded that there was no fixed maturity date or fixed obligation to repay. While correct, we find that this factor carries little weight in the final analysis. The parties structured the advances as demand loans, which had ascertainable (although not fixed) maturity dates, controlled by the Rowes. Piedmont Minerals, 429 F.2d at 563 n.5 (“The absence of a fixed maturity date is a relevant consideration, but it is far from controlling. The maturity of a demand note is always determinable by its holder.”). Furthermore, the temporary waiver of payment does not convert debt into equity “since [the stockholders] still expected to be repaid.” AutoStyle Plastics, 269 F.3d at 751. Where advances are documented by demand notes with a fixed rate of interest and regular interest payments, the lack of a maturity date and schedule of payments does not strongly favor equity. To give any significant weight to this factor would create a virtual per se rule against the use of demand notes by stockholders, even though “[m]uch commercial debt is evidenced by demand notes.” Piedmont Minerals, 429 F.2d at 563 n.5; see also AutoStyle Plastics, 269 F.3d at 750 (cautioning against a “rigid” rule that the factor always indicates equity).