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At the time Estes pledged the stock, it had a value of
approximately $200,000 ($2 per share).
On September 2, 1981, petitioner and Estes as individuals
and general partners of the partnership obtained an additional
loan of $70,000 and executed a promissory note in favor of the
bank for $245,000. This promissory note incorporated the
previous promissory note and the additional loan amount. On
December 8, 1981, petitioner and Estes returned to the bank and
obtained a loan of $50,000 and executed a promissory note in
favor of the bank in their individual and general partner
capacities. Neither partner pledged any collateral for these
loans.
On December 8, 1982, the partnership's loan balance was
$294,000, and it owed the bank $59,762 of accumulated interest.
On this date, petitioner paid $353,762 to the bank in full
satisfaction of the promissory notes, and the bank released the
100,000 shares of Theratech stock to petitioner. At the time the
bank released the stock, it had a value of approximately $1 per
share.
Also on this date, Estes signed a promissory note in favor
of petitioner for $176,881. The note provided for 10-percent
interest per annum and payment in full on December 8, 1983, and
thereafter on demand of holder. The partnership ceased all
business activities in 1982.
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