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New Construction Loan
At some point, AMI stopped funding the construction loan.
Thereafter, Towers Development completed the Gulf Highlands
project with funds provided by various sources, including Towers
Construction, Imperial Pines, and other companies, as well as by
a new construction loan. The new construction loan, in the
amount of $1,947,000, was made on June 30, 1987, by First Federal
Savings & Loan Association of Panama City, Florida (First
Federal), to Briggs, Daniell, Towers Development, and Towers
Construction. Under the terms of the construction loan
agreement, First Federal was to provide periodic advances based
on the percentage of completion of the construction project, as
determined by First Federal. The borrowers agreed to receive the
advances and to hold them “as a trust fund for the purpose of
paying the costs of construction of the Improvements * * * and
for no other purpose.” Towers Development made all of the loan
payments, including principal and interest, to First Federal.
Briggs, the Morrises, Daniell, and Towers Construction made no
loan repayments to First Federal.
Not taking into account any adjustment relating to AMI’s
loans to Towers Development, petitioners’ bases in their Towers
Development stock for the years in issue were as follows:
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