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IRA's writeoff of these notes receivable from Ballard and
Lisle was based on the contention that Ballard and Lisle did not
acknowledge that any debt existed.
During 1987 Ballard and Lisle had the resources to pay in
full the subject notes held by IRA.
IRA failed to establish that the notes of Ballard and Lisle
were in fact debts of Ballard and Lisle. If, however, the notes
represented indebtedness, IRA failed to establish that the notes
of Ballard and Lisle, in the amounts of $84,889 and $12,185,
respectively, became worthless in 1987.
H. Abernathy (Abernathy) was a preferred shareholder of IFI.
During 1974 and 1975, IFI lent Abernathy amounts totaling
$105,000. The loans were evidenced by three demand notes, signed
by Abernathy, that recited an interest rate of 10 percent. In
1977, the loans were partially repaid by crediting Abernathy's
preferred stock dividends from IFI against the balance of the
loans. As of December 1987, IFI's books reflected a balance due
on the loans of $67,098.04. In December 1987, IFI transferred
this loan to IRA as part of its consideration for the
cancellation of IFI's debt to IRA. IRA reduced the basis of this
loan to $28,862.29 and wrote off that amount as a bad debt.
IRA failed to establish that the note receivable from
Abernathy had any value prior to 1987 and failed to establish
that the note became worthless during 1987.
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