Henry and Esther Misle - Page 23




                                               - 23 -                                                  
                  With respect to the FirsTier note, Henry and Esther contend                          
            that payments made by HJA are not includable in their taxable                              
            income because:  (1) A Nebraska State court already has held that                          
            Henry was merely an accommodation party on the FirsTier note and,                          
            therefore, the doctrine of collateral estoppel requires that this                          
            Court find he was not a primary obligor with respect to that                               
            debt, and (2) even if the doctrine of collateral estoppel does                             
            not apply, Henry was not the primary obligor on the FirsTier                               
            loan, and, therefore, he was not required to recognize income                              
            when the loan was repaid.                                                                  
                  With respect to the Chevrolet debt, Henry and Esther argue                           
            that Henry was not the primary obligor because (1) the Chevrolet                           
            debt consisted of intercompany debts owed to Chevrolet by other                            
            companies in the Misle group; (2) when HJA, the successor parent                           
            corporation in the 1986 reorganization, paid off the Chevrolet                             
            debt, it was paying off its own debt, not Henry’s debt; and (3)                            
            since Henry was not the primary obligor on the Chevrolet debt,                             
            HJA’s repayment of that debt did not relieve Henry of any                                  
            personal liability.  Henry also argues that he did not receive                             



                  20(...continued)                                                                     
            the FirsTier note and the Chevrolet debt, then HJA is entitled to                          
            a deduction only for the total amount of the covenant not to                               
            compete payments less the payments on the FirsTier note and the                            
            Chevrolet debt (with adjustments in related interest income and                            
            interest expense), and Henry and Esther must report a                                      
            corresponding amount as ordinary income on their tax returns.                              





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