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ii. Primary Loans
Judge Goffe determined that several features of the primary
loans prevented them from being genuine debt in substance.
First, Judge Goffe found that Mr. Kersting and program
participants had an understanding at the commencement of a
program, as reflected in a number of so-called comfort letters,
that a primary loan obligation could be satisfied in full at any
time by a mere surrender of the associated stock certificate. In
so finding, Judge Goffe rejected Mr. Kersting's testimony that he
did not represent to program participants that they could
exchange their stock for cancellation of a primary note at any
time. To the contrary, Judge Goffe listed the following nine
items in support of his conclusion that Mr. Kersting applied the
policy outlined in his so-called comfort letters to all program
participants: (1) Mr. Thompson's testimony that Mr. Kersting
assured him of the exchange policy; (2) Mr. Kersting's
description of a stock subscription plan to Mil Harr; (3)
Gabriele Kersting's form letter to test case petitioner Terry D.
Owens describing a stock subscription plan; (4) Mr. Kersting's
form letter describing a leasing corporation plan; (5)
Mr. Kersting's form letter issued on the first anniversary of a
leasing corporation plan; (6) Mr. Kersting's acknowledgment in a
comfort letter that such a letter would be issued to "every
participant * * * if it would not weaken YOUR position with the
IRS"; (7) Mr. Kersting's broad statement in a later comfort
letter that "We will always repurchase the stock issued at a
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