Melvin R. Sweatman - Page 11

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          Indeed, no payments were made on the Note until July 22, 1993,              
          after a revenue agent auditing Paz met with one of petitioner's             
          accountants and requested a signed copy of the Note and evidence            
          of repayment.  Petitioner contends that his failure to make                 
          payments when due resulted from oversight, specifically, his                
          failure to recall when payments were due and the failure of his             
          accountants to remind him.  We do not find this contention                  
          credible.  Even accepting the view that petitioner was a busy               
          executive who relied on his accountants, we do not believe that             
          he could fail to recall at some point, over a period exceeding 3            
          years, his obligation to repay $150,000 on which interest was               
          accruing, particularly in light of the fact that, during such               
          period, he liquidated the asset that was the purported security             
          for the obligation.  Petitioner received substantial cash upon              
          the sale of the Ranch to third parties in August 1991, and while            
          this was concededly before the agreed due date of his first                 
          repayment, payment on the Note was past due when petitioner                 
          converted the third-party purchasers' promissory note to cash in            
          October 1992.  We believe that if petitioner had intended to                
          create bona fide indebtedness to Paz, he would have made some               
          payment on the Note prior to a request by a revenue agent for               
          evidence of repayment.                                                      
               Finally, the circumstances surrounding the ex post facto               
          execution of the Note cast doubt upon the bona fides of the                 
          obligation and upon the credibility of petitioner and his                   




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