Lauro G. and Gayle W. Guaderrama - Page 20




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          reasonably certain of recovering the principal and a major                     
          portion of the discount.  See id. at 495.  We are not persuaded                
          that the loan in the present transaction was speculative.                      
               The Guaderramas argue that Benavidez had insufficient assets              
          to exercise the option and purchase the property.  Insufficient                
          assets, however, is not the test of a speculative investment for               
          tax purposes.  In Estate of Ratliff v. Commissioner, T.C. Memo.                
          1995-428, we stated that “mere absence of security is not                      
          sufficient to deem a loan speculative.”  In any event, we are not              
          convinced that Benavidez was unable to exercise the option to                  
          purchase the property.  Indeed, Benavidez was approved for a loan              
          from the SBA in 1996 and was in a financial position where he                  
          could have exercised the option.  Guaderrama was apparently aware              
          of this since Guaderrama’s attorney sent a letter to a bank                    
          expressing interest in selling the property to Benavidez in order              
          to help Benavidez qualify for a loan.  Thus, the evidence in the               
          record suggests that Benavidez could have exercised the option.                
               The Guaderramas further argue that Benavidez’ sole source of              
          funds was dependent on operating the new restaurant successfully,              
          making the likelihood of repayment speculative.  There is no                   
          evidence, however, that Severo’s would not be successfully                     
          operated by Benavidez.  As Guaderrama testified, he himself had                
          studied the transaction and decided that it would be a good                    
          investment.  Thus, we find this argument unpersuasive.  We also                






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