Alton W. Burns and Pamela Burns - Page 3

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                  Riviera manufactured fiberglass boats.  Petitioners                                    
            incorporated Riviera on January 12, 1978.  Petitioners were the                              
            100-percent shareholders of Riviera.  Petitioner husband was the                             
            president of Riviera, and petitioner wife was its vice president.                            
                  Petitioners initially invested $30,000 for the common stock                            
            of Riviera.  Petitioners also initially "loaned" Riviera                                     
            $42,809.03 represented by a promissory note.  In return for                                  
            advancing these funds, Riviera executed a 6-page security                                    
            agreement on January 13, 1978, that granted petitioners, among                               
            other rights, a security interest in "all boats, motors, pumps,                              
            inventory, molds, equipment, tools, raw materials, work in                                   
            process and accounts receivable".                                                            
                  By August 31, 1979, petitioners claim they had advanced                                
            Riviera an additional $44,755.81.  Riviera and petitioners                                   
            executed a total of $87,564.84 in promissory notes as of that                                
            date.                                                                                        
                  On October 9, 1979, in a document entitled "Action by                                  
            Unanimous Written Consent of the Board of Directors", Riviera                                
            ratified the above-mentioned "borrowings" described in the                                   
            security agreement and the promissory notes.  On October 9, 1979,                            
            petitioners, in their individual capacities, sent a letter to                                
            Riviera demanding "payment of the total amounts due [$87,564.84]                             
            under the notes including interest not later than 10 days from                               
            receipt of this letter."                                                                     






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