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Jeffrey expected that he would be repaid in approximately 18
months. The repayment was to be made from certain insurance
proceeds that Super City Meats was to receive. The insurance
proceeds were from policies on Stephen's business partner, the
executive manager and other 50 percent co-owner of Super City
Meats, who had been murdered on the business premises in July of
1990. During that time, Super City Meats was also having
problems with sales and collecting receivables due to alleged
pressure from the Chinese mafia. When Jeffrey advanced Stephen
the $100,000, he was aware that Stephen's business partner had
been murdered.
Petitioner is a graduate of the University of Pennsylvania
and Harvard Law School. At that time, petitioner was retired and
invested in various fields, especially mutual bond funds. On
February 28, 1991, petitioner and Jeffrey executed an agreement
where Jeffery transferred to petitioner his rights created under
the note for $100,000.2 Petitioner testified that he acquired
the note because he considered it a good investment. Petitioner
testified that at that time his investments paid between 7 and 9
percent interest, and the original 13 percent interest on the
note was an attractive investment. On their 1993 Federal income
tax return, petitioners reported taxable interest of $73,672 and
tax-exempt interest of $207,628. In addition, petitioners
2 Petitioners' 1993 Federal income tax return, however,
indicates an acquisition date of Sept. 13, 1990.
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