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On their face, the guaranties appear valid and enforceable.
Both guaranties stated, on their face, that they were supported
by adequate and sufficient consideration. The first guaranty
stated that it was supported by two forms of consideration: (1)
Appolo's promise not to demand immediate payment on past loans
made to Four A, and (2) Appolo's promise to make future loans to
Four A.4
It is well settled under Kentucky law that forbearance to
sue is a sufficient consideration to support a promise. Sellars
v. Jones, 175 S.W. 1002, 1003 (Ky. Ct. App. 1915). The first
guaranty stated that Appolo promised to forbear suing Four A on
Four A's past debt; thus, the first guaranty was supported by
adequate and sufficient consideration and is enforceable.
G. Asher and L. Asher argue that although the guaranty
recites that Appolo promised to forbear suing Four A on Four A's
past debt, Appolo never actually made such a promise to the Four
A shareholders. The only evidence submitted by petitioners to
disprove the existence of that promise was their own self-serving
testimony. Under these circumstances, we are not required to and
do not accept the self-serving testimony of petitioners. See
Tokarski v. Commissioner, 87 T.C. 74 (1986).
4 By its terms, the first guaranty covers all loans made by
Appolo to Four A. If the first guaranty is enforceable, then the
debt is not worthless regardless of whether the second guaranty
is enforceable, and Appolo is not entitled to a bad debt
deduction for the debt.
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