- 5 -
issued to Stephen in an account labeled "Notes Receivable--S.
Miller" in petitioner's general ledger.7
Petitioner gave8 Stephen the two $50,000 checks in question
in response to his request for her assistance in paying off a
mortgage in the approximate amount of $56,000 that encumbered the
house that he and his wife had purchased in 1980 for $300,000 and
that became due in 1982. In November 1982, Stephen used approxi-
mately $56,000 of the $100,000 that he received from petitioner
in order to retire that mortgage.
In connection with petitioner's issuance of the two $50,000
checks to Stephen, he signed a non-interest-bearing note dated
September 14, 1982 (September 1982 note) in the principal amount
of $100,000 that was payable to petitioner. Although petitioner
was generally familiar with the concept of secured obligations,
she did not request Stephen to secure that note, and it was not
secured, by real property or any other collateral.
The September 1982 note provided that Stephen was to pay
petitioner $100,000 on demand or on September 14, 1985, if no
demand was made. In other words, pursuant to the terms of that
7 While Mr. Delmarter was responsible for supervising PKF's
maintenance of petitioner's financial records, other individuals
employed by PKF made the actual entries in those records to
reflect petitioner's financial transactions.
8 The use herein of the words "gave", "note", "obligation",
"loan", "principal", "forgiveness", "indebtedness", and similar
words does not reflect the Court's view of the substance of the
transactions at issue.
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