Dennis C. Gandy - Page 16

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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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