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Ampel notes, with $201,158.56 to be paid immediately, in cash,
and the balance ($19.3 million) due on March 2, 1999.
Floridama’s obligation to pay $19.3 million on March 2, 1999, was
evidenced by its interest-bearing note (the Floridama note).
Interest was to be paid on the Floridama note at an annual rate
of 10.88 percent. Pursuant to a stock pledge agreement,
petitioner held Floridama stock as security for the Floridama
note. On March 2, 1989, the accrued interest on the 1987 Ampel
notes was $2,449,974. Petitioner’s adjusted basis in the 1987
Ampel notes at their sale to Floridama was $6,940,865
Sometime in 1991, petitioner exchanged the Floridama note
for two notes from Ampel in the total amount of $25.5 million
(the 1991 Ampel notes). Petitioner exchanged the Floridama note
for the 1991 Ampel notes in order to facilitate Ampel’s
redemption of the 1987 Ampel notes. He did so because Ampel had
failed to pay interest to Floridama on the 1987 Ampel notes, and
Floridama had threatened to foreclose on the related mortgages,
which, petitioner believed, would have limited the amount that,
eventually, he would have been able to obtain from Floridama with
respect to the Floridama note. As of the time of trial,
petitioner still held the 1991 Ampel notes, on which he had, as
of then, received no payment.
Holland Spring Notes
Holland Spring, Inc. (Holland Spring) is a Florida
corporation. In December 1987, Holland Spring purchased from
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