Lee D. Froehlich - Page 25

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          when the payment is made.  French v. United States, supra at                
          1248; Smartt v. Commissioner, supra; Modell v. Commissioner, T.C.           
          Memo. 1983-761; Cho v. Commissioner, T.C. Memo. 1976-318.6                  
          Petitioner personally guaranteed payment of the entire floor plan           
          loan as early as July 31, 1988.  The last record of an extension            
          of the guarantee, on October 15, 1989, however, reflects that               
          petitioner signed a promissory note to extend the floor plan loan           
          to December 1, 1989.  We are unable to view the extension(s) of             
          the guarantee as a new commitment.  As its nomenclature                     
          indicates, an "extension" merely continues the original                     
          obligation.  Thus, petitioner's motivation with respect to the              
          floor plan arrangement is measured as of July 31, 1988.                     
               1.  Petitioner's Investment--Petitioner owned all the                  
          outstanding stock of the corporate dealership.  His total                   
          contribution was composed of two amounts each approximating                 
          $400,000.  The first $400,000 was comprised of petitioner's                 
          liquid assets of $250,000 and a $150,000 note.                              
               In attempting to minimize the relative size of his                     
          investment in the dealership, petitioner argues that it would not           

               6                                                                      
                    The statute and the regulations do not                            
                    tell us at what point in time we should look                      
                    to determine proximity in a guaranty context.                     
                    * * * [Case precedent holds] that the time to                     
                    determine proximity is the time when                              
                    petitioner entered into his guarantee                             
                    agreements.  [Cho v. Commissioner, T.C. Memo.                     
                    1976-318.]                                                        




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