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The replacement notes were signed by Mrs. Saxon as vice
president on behalf of SS&N and by Mr. Salem and Mrs. Saxon as
individuals. The security on the replacement notes remained the
same as on the original. During 1990, SS&N made all payments to
the bank on the loans.
SS&N filed Forms 1120S, U.S. Income Tax Return for an S
Corporation, for the short taxable year ending December 31, 1989,
and for the taxable year ending December 31, 1990. SS&N reported
a loss of $245,711 for the 1990 taxable year, of which $221,140
was allocated to Mr. Salem and $24,571 was allocated to Mrs.
Saxon.
SS&N's 1990 return reflects loans payable to shareholders in
the amount of $1,110,287, while its ledger for 1990 reflects that
loans in the same amount were payable to the bank. There were
never any loan documents executed among SS&N, Mr. Salem, and Mrs.
Saxon evidencing loans from the shareholders to the firm.
2. Minutes of Meetings of the Officer's Loan Committee and
the Loan Committee.
Accurate minutes of the meetings of the bank's Officers Loan
Committee and the Loan Committee (the minutes) were taken at the
time the committees discussed making or extending loans to the
bank's customers. Minutes of committee meetings considering
personal loans to Mr. Salem and Mrs. Saxon were reported under
the headings of "Richard J. Salem" and "Bernice Saxon". When the
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