Business valuation professionals must decide whether shareholder loans are bona fide debt obligations, a type of equity transaction or a hybrid of the two. Debt vs. equity classification has relevance when valuing a business, as well as in divorce cases. This article explains why the distinction matters and what factors the IRS considers when deciding what qualifies as a bona fide loan.
In re Appraisal of PetSmart, Inc., Delaware Ch., C.A. No. 10782-VCS, May 26, 2017