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identified the business as a "Newsletter for Restaurant Patrons".
The loss did not relate to any newsletter business, but instead
related to a promissory note that was executed by Mr. Richard
Kluzak (Mr. Kluzak) in favor of petitioner in the principal
amount of $70,000, dated October 6, 1986 (the promissory note).
The promissory note stated that the $70,000 principal was due on
or before October 6, 1987. This note was for prior indebtedness
of Mr. Kluzak to petitioner which had originally been in the
amount of $120,000, on which Mr. Kluzak had paid approximately
$50,000, plus interest, in prior years. Petitioner had no
collateral for the loan, but petitioner had investigated Mr.
Kluzak at the time the promissory note was signed and had
determined that the note would be collectible. His investigation
included contacting a credit bureau in Fargo, North Dakota.
Petitioner determined at that time that Mr. Kluzak had net assets
worth several million dollars. In late 1987, when the note
became due, petitioner attempted to collect from Mr. Kluzak, but
was unsuccessful. At that time, Mr. Kluzak informed petitioner
that he had suffered several business reversals and that he did
not have any money to pay on the promissory note. Petitioner
made some inquiries as to Mr. Kluzak's financial affairs, but
took no legal steps in an effort to collect on the note.
On February 8, 1988, creditors filed an involuntary
bankruptcy petition under chapter 7 of the Bankruptcy Code
against Mr. Kluzak in the U.S. Bankruptcy Court in the District
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