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petitioner's debt, and petitioner is denominated as "President"
of the corporate entity, FRO Enterprises, Inc.
Finally, Sanwa Bank prepared two documents that were both
entitled "Continuing Guaranty". The first one, typewritten and
dated March 2, 1987, states that the cap loan of $400,000 was
made to the auto dealership. In this document, petitioner is
denominated "Guarantor" and the auto dealership "Debtor". On the
top front page of the first document is the word "Backwards" in
handwriting. The second document bears a handwritten date of
March 2, 1987. The second document extends the cap loan to
petitioner, and the auto dealership is listed as the "Guarantor".
On top of the second document is handwritten: "$400,000 cap
loan, 9/27/89, to replace note signed backwards".
Cap loans were common in the automobile industry.
Typically, these loans were made to the corporate entities.
Petitioner's bank records, however, reflect that he deposited the
$400,000 cap loan proceeds into his personal account and then
transferred the funds to the auto dealership. The March 1987
dealer financial statement reflected petitioner's initial capital
contribution consisting of the $400,000 cap loan and petitioner's
other contributions of approximately $400,000.
On July 9, 1986, petitioner obtained a $2,500,000 floor plan
line of credit. The auto dealership is listed as the "Borrower".
This particular loan was required to be renewed annually. A
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