George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 14

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            gave the agent the backdated Holding Agreement, Supply Agreement,                              
            minutes, and promissory notes.                                                                 
                  In a letter dated December 13, 1991, Bernard informed Pryor                              
            that Bernard just became aware of the October 15, 1988, date on                                
            the Holding Agreement.  The letter stated:                                                     
                  I discovered, to my chagrin, that the Holding Agreement                                  
                  contains an obvious error which, if not called to the                                    
                  attention of the person to whom it was delivered, could                                  
                  be misleading.                                                                           
            *     *     *     *     *     *     *                                                          
                  As you know, the Holding Agreement was, in fact,                                         
                  drafted on August 6, 1991 to memorialize the                                             
                  understanding which Mr. Georgiou and Kolonaki had                                        
                  reached in October 1988.  * * *                                                          
            Bernard stated in the letter that the inaccurate date was a                                    
            typographical error that was the result of "boilerplate" language                              
            on his computer.  Bernard asked Pryor to forward the information                               
            about the error to the agent.                                                                  
                  The agent also requested information from Ernst and Young                                
            regarding Kolonaki's beneficial ownership.  In a letter dated                                  
            February 13, 1992, Ernst and Young informed the agent:  "We first                              
            learned in writing of the holding agreement upon receipt of the                                
            client representation letter dated September 24, 1991, for the                                 
            1990 fiscal year."                                                                             
                  Respondent disallowed the JAI loss that was deducted by                                  
            Kolonaki on Kolonaki's 1990 Form 1120 tax return.                                              

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