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collateral for the loan. On February 27, 1989, Security informed
petitioner by letter that on February 2, 1989, the Security loan
had matured and the bank was unable to further extend it. The
letter stated that the Security loan had not been paid, requested
payment, and stated that if payment was not made, the bank would
“be compelled to pay off the loans out of the various
certificates of deposit which are pledged to secure the loans.”
Security used the certificate of deposit to pay off the Security
note sometime after February 27, 1989.
Guaranty Agreement
After the transfer of its interest in the Sheraton Hotel to
Mr. Grossman, VIP had no assets other than the replacement note.
VIP would not have been able to secure the Security loan without
posting adequate collateral. Petitioner's certificate of deposit
was taken to pay not only the Security note but also two other
loans, that of petitioner and of Gemini Management.
Worthlessness: Year and Existence
Petitioner expected that payments from the replacement note
would allow him to pay off the Security note. Although the
maturity date of the replacement note was September 15, 1986,
petitioner believed that Mr. Grossman was going to pay it within
30 days of the issuance date, in January of 1986. In January of
1986, Security told petitioner that the Security note had not
been paid. During 1986, petitioner pursued Mr. Grossman on a
regular basis to pay the replacement note; he called Mr. Grossman
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