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domestic trust, the Durand Trust, which owned all the stock of
Dynamic, which owned many of Mr. Mohney's operating companies.
Shortly after petitioner's incorporation, Mr. Mohney
transferred to it the Mishawaka property and the Clarksville
property.1 The transfer was not negotiated, and the deeds on the
Clarksville property and the Mishawaka property were recorded on
September 5, 1978 and March 21, 1980, respectively. In
connection with the transfer, petitioner assumed liability on the
Clarksville note, the principal of which was then $34,350.
Petitioner also issued Mr. Mohney a promissory note for the
Clarksville property (Second Clarksville note).2 The Second
Clarksville note stated that petitioner was to pay Mr. Mohney
$120,000 on or before November 3, 1982. It set forth an interest
rate of 10 percent, and it was signed by petitioner's then
president. Petitioner made no payments of principal or interest
to Mr. Mohney during the years 1977 through 1988 on the Second
Clarksville note, and Mr. Mohney did not pursue collection of the
note.
1 Mr. Mohney's 1977 Federal income tax return did not report
either transfer as a sale.
2 Petitioner also alleges that it issued a $45,000 note to
Mr. Mohney in connection with the transfer of the Mishawaka
property. Petitioner did not produce any such note at trial, and
no payments were made on the alleged note before 1989. The
record does not indicate that Mr. Mohney attempted to pursue
collection of any obligation from petitioner to him with respect
to the Mishawaka property.
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