Philip A. Sellers - Page 6




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          cash-flow problems and was struggling to survive.  Because its              
          assets had already been leveraged, Gandy’s was unable to obtain             
          financing from financial institutions.  In 1990, petitioner,                
          either directly or through his wholly owned corporation                     
          Continental Mortgage, advanced $300,000 to Gandy’s as follows:              
                         Date                     Amount                              
                         7/30/90                  $100,000                            
                         8/13/90                  40,000                              
                         8/13/90                  60,000                              
                         12/11/90                 100,000                             
                                                                                     
          Each of these four advances (the 1990 advances) was evidenced by            
          a promissory note, each stating an 8-percent interest rate.  The            
          July 30, 1990, promissory note indicates a due date of                      
          December 31, 1991.7  The December 11, 1990, promissory note                 
          indicates a due date of December 11, 1991.  The other two                   
          promissory notes were payable on demand.                                    
               Gandy’s used the 1990 advances for working capital and to              
          meet daily operating expenses.                                              
               During 1991 or 1992, Gandy’s made no repayments of the 1990            
          advances.  During 1991 and 1992, neither petitioner nor any other           
          party made any additional advances to Gandy’s.                              






               7 The note in the record regarding the July 30, 1990,                  
          advance is dated Dec. 31, 1990, and bears a handwritten notation            
          that it “covers wire of 7/30/90”.                                           





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