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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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