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On September 30, 1986, petitioners borrowed $24,836.21 from
Paccar Financial Corporation to purchase a piece of equipment.
Petitioners completed repayment of this loan by January 17, 1988,
making payments from the nursery bank account.
On October 10, 1986, petitioners borrowed $35,000 from the
First State Bank of Van. Petitioners deposited this money into
the nursery bank account. They repaid the loan on March 4, 1987,
from the nursery bank account.
During the fall of 1987, Mrs. Gandy d/b/a the Gandy Travel
Agency borrowed a total of $8,300 from First National Bank of
Canton.
Loans Made by Petitioners
In 1985, petitioners began lending money to individuals,
generally for the purchase or construction of personal
residences, residential rental properties, or commercial
buildings. During 1985 through 1987, petitioners made loans
totaling at least:
Year Amount
1985 $139,222.62
1986 371,546.98
1987 209,918.13
$720,687.73
Petitioners used funds from the nursery receipts to make many of
the mortgage loans; on one occasion, petitioners borrowed $90,000
as partial funding for a $118,500 loan to Fowler. As petitioners
began receiving payments from the early borrowers, they used some
of these funds to make new loans. The mortgage loan payments
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