Jerry and Patricia A. Dixon, et al - Page 167




                                       - 242 -                                        

                    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                

Page:  Previous  232  233  234  235  236  237  238  239  240  241  242  243  244  245  246  247  248  249  250  251  Next

Last modified: May 25, 2011