Thomas F. and Therese Grojean - Page 8

                                        - 8 -                                          
          participating interest in the Schanno note to $1 million.  At the            
          same time, petitioner signed a $200,000 revolving credit note                
          (Grojean credit note), keeping the total amount he received in               
          the form of a loan at $1.2 million.  Petitioner then purchased a             
          $200,000-participation interest in the credit note.  Petitioner              
          and American amended the participation agreement to reflect this             
          purchase.2  The Grojean credit note had the same interest rate               
          and other terms as the credit note, and petitioner became                    
          entitled to payments for his participation interest only when                
          American received payments under the credit note.  American's                
          share of the credit note was superior to petitioner’s $200,000               
          share.  American and petitioner amended other related documents              
          as well to incorporate these changes, including the loan                     
          agreement and the stock pledge and security agreement.  American             
          had sole and absolute discretion to exercise any rights under the            
          credit note, without advice or consent from petitioner.  American            
          debited and credited interest payments to and from petitioner’s              
          checking account under the credit note and the Grojean credit                
          note as Schanno paid the amounts due under the Schanno note and              
          the credit note.                                                             
               For 1989, 1990, and 1991, American credited petitioner’s                
          checking account with interest income relating to his                        
          participation interests in the Schanno note and the credit note              

               2The record does not indicate whether American issued a                 
          participation certificate to petitioner for his interest in the              
          credit note.                                                                 

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next

Last modified: May 25, 2011