Dennis C. Gandy - Page 27

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          amounts transferred into the nursery bank account from the B&D              
          account totaled $187,000.                                                   
               At various times during the years in issue, Mr. Gandy made             
          statements to petitioners’ employees, relatives, and friends to             
          the effect that he was "sticking it to Uncle Sam" and "going to             
          beat the government" and that "the only way to get ahead was to             
          steal from yourself and cheat the government, or not to show my             
          cash transactions, you know, in business."                                  
          The Lake House                                                              
               At some point prior to January 1985, Mr. Gandy cosigned a              
          loan for Doug Christensen (Christensen).  The security for this             
          loan was a property known as the lake house.  Christensen failed            
          to make payments, and the bank foreclosed on the mortgage.                  
          Petitioners borrowed $115,000 from Lindale State Bank on                    
          January 10, 1985, and, of that amount, used $99,027.67 to redeem            
          the lake house; the remaining $15,972.33 went to pay off a loan             
          of $15,000 that Mr. Gandy had borrowed from Lindale State Bank on           
          January 16, 1984.                                                           
               Petitioners made the following payments on the loan from               
          Lindale State Bank, all of which were made in cash:                         

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