Thomas F. and Therese Grojean - Page 13




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          participation interest by virtue of the following circular                   
          transaction with American:  (1) Petitioner borrowed $1.2 million             
          from American, and petitioner signed the Grojean note; (2)                   
          petitioner returned the $1.2 million to American; (3) American               
          gave petitioner a participation certificate evidencing a $1.2                
          million participation interest in the Schanno note.  No cash                 
          changed hands, and American handled the transaction through                  
          simultaneous electronic debits and credits.  When the parties                
          amended the arrangement to include a participation interest in               
          the credit note, it was handled similarly with no cash changing              
          hands.                                                                       
               The Schanno note and the credit note were the mirror images             
          of the Grojean note and the Grojean credit note, respectively.               
          When American received a monthly payment on the Schanno note or              
          the credit note, American credited petitioner’s participating                
          share to petitioner’s checking account and contemporaneously                 
          debited the account for the interest payments due under the                  
          Grojean note and the Grojean credit note.  Once American                     
          recovered its principal on both notes, petitioner’s share of                 
          principal was to be credited against the principal due on the                
          Grojean note and the Grojean credit note.  Payments by Schanno on            
          the Schanno note and the credit note kept petitioner current on              
          the Grojean note and the Grojean credit note.  Like a guarantor,             
          petitioner would not be liable--thus not called upon to make an              






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Last modified: May 25, 2011