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"unconditional" nature of petitioners' obligation, however, they
chose to make no payments whatsoever until March 15, 1992, when
they made a lump sum interest payment of $232,200. At the time
of the payment, the IRS audit of petitioner's 1989 return had
been underway for almost a year. (The parties stipulated that
petitioners' obligation had been made current by December 4,
1994, the day before the case was submitted. We note, however,
that since the Capital Note provides that no principal payments
would be required until February 1, 1995, none were required to
make the obligation current as of December 4, 1994.)
Notwithstanding the provision of the Capital Note providing
for acceleration in the event of default at the option of the
holder, there is no evidence suggesting that NAC Corporation
chose to exercise this option. Since petitioners did not intend
to make timely payments on the Capital Note, it is not surprising
that they did not see fit to cause NAC Corporation to exercise
its option. Petitioners, 100 percent stockholders, were totally
in control of NAC Corporation. Donald Peracchi was the sole
director. In cases involving closely held corporations, such as
this case, where the parties do not deal at arm's length, it is
highly unrealistic to expect them to enforce obligations against
themselves, as petitioners' casual approach to their payment
obligations bears out. See Alterman Foods, Inc. v. United
States, 505 F.2d 873, 877 (5th Cir. 1974).
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