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note (the WRI note) in which WRI promised to pay Intent $1.5
million or so much thereof as might be advanced and outstanding
from time to time, plus interest. The WRI note states that it is
secured by a mortgage on real estate; however, no mortgage was
recorded in Osceola or Orange County record books.
Intent did not default on the Westfield mortgage from 1986
to 1990.
3. Wesco's Loans to WRI
Wesco lent some operating capital to WRI. WRI recorded its
receipt of those funds by increasing its loans payable account.
Wesco correspondingly increased its loans receivable account.
WRI made no repayments in cash or property to Wesco during WRI's
fiscal year 1988. As of July 31, 1987, WRI's books stated that
it had a $980,690 loan payable to Wesco.
D. Wise's Management and Accounting Fees
Wise, as president of WRI, was responsible for WRI's daily
operations including planning, accounting, and financing. On its
fiscal year 1988 tax return, WRI deducted professional management
and accounting fees in the amount of $173,974 for services Wise
rendered to WRI through Wise’s sole proprietorship, Pro-Ser. WRI
accrued expenses for management and accounting fees even though
WRI generally did not pay the fees to Wise in cash or property.
Wise recorded that he immediately made "loan backs" to WRI and
reported the income on his tax return in the year WRI took the
deduction. Yearend adjusting journal entries on the books and
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