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Generally, Winery's payments to Vineyards for grape purchases
were deferred between 1 and 4 years after delivery.
Vineyards permitted Winery to defer payment of the interest
accruing on Vineyards' receivables from Winery. Vineyards
further allowed, or acquiesced in, the control by Winery's
lenders of payments to it of interest and rent. During each year
from 1984 until 1986, Winery began paying to Vineyards some of
the interest accrued on Vineyards' receivables from Winery using
funds from Winery's line of credit. Vineyards also made
agreements with Bank of America concerning the amount of interest
it was entitled to collect from Winery with respect to the
receivables. Bank of America, however, as a condition of
renewing Winery's line of credit during late 1986, required that:
(1) Payments of interest to Vineyards cease; (2) no further
accruals occur without its consent; and (3) all accrued and
unpaid interest owed by Winery to Vineyards, totaling $79,739, be
eliminated from Winery's books.6 The interest eliminated was
never paid to Vineyards. Despite a provision in the Grape
Payment Calculation that called for the payment to Vineyards of
6 While petitioner maintains that the interest accrued was
eliminated at the insistence of Bank of America, we note that the
letter from Bank of America to Winery outlining the terms on
which Winery's line of credit would be renewed states that "As
Borrower [Winery] has proposed, all existing accrued and unpaid
interest owed by Borrower to Guarantors [including Vineyards] is
to be reversed and eliminated from Borrower's books by 12/31/86."
There is accordingly some question concerning whether the accrued
interest was eliminated at the instance of the Bank of America.
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