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Sleiman and SouthTrust Bank's officers, we find that the
substance of each loan is consistent with its form. First, as
discussed infra, the loans from SouthTrust Bank to REE and TNE do
not lack economic substance. Second, REE and TNE did not treat
the loan proceeds as contributions to capital by Peter and Eli on
their own books and records. Rather, they recorded the loans
from SouthTrust Bank as liabilities owed by REE and TNE to
SouthTrust Bank.
Petitioners argue that SouthTrust Bank in substance relied
primarily on Eli's and Peter's personal guaranties as security
for the loans rather than the assets listed in the mortgage and
security agreements. We reject petitioners' attempts to
disregard the value of the properties owned by REE and TNE and
used as collateral for their loans. In addition to the value of
the land and improvements, the Blockbuster leases provide ample
cash-flow to service the loans. Contrary to petitioners'
contentions, we find that SouthTrust Bank took into account the
risks associated with the contamination of the land supporting
the loan by conditioning its loan commitments on its review of
environmental audits of the land. SouthTrust Bank also minimized
its economic exposure to future environmental problems in the
mortgage and security agreements. We find that petitioners have
failed to prove that the loans to REE and TNE lack economic
substance.
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