Cerand & Company, Inc. - Page 8




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          corporations, petitioner’s only effort to enforce collection                
          occurred after it was clear that the sister corporations had                
          failed and were to become defunct, whereupon petitioner recovered           
          the only remaining asset-–the cash value of a life insurance                
          policy on Mr. Cerand.                                                       
               Control of petitioner and its three sister corporations                
          rested with Mr. Cerand.  He was the sole shareholder of                     
          petitioner, the alleged creditor, and he was also the sole                  
          shareholder of all three sister corporations, the alleged                   
          debtors.  Mr. Cerand in conjunction with petitioner as the equity           
          investor in its sister corporations, not only participated in the           
          management, but controlled all aspects of all four corporations.            
               Although petitioner contended it was the intent of the                 
          parties to create debt, the alleged debt would have been                    
          subordinate to any creditors the three sister corporations may              
          have had, because petitioner did not take the usual or ordinary             
          precautions to ensure its position vis-a-vis unrelated creditors.           
               Essentially, petitioner bankrolled a group of startup                  
          corporations.  If we accepted petitioner’s characterization that            
          all advances were loans, then the startup equity or capital was             
          less than thin--it was nonexistent.  This may explain why                   
          petitioner and its related entities did not try to obtain credit            
          from outside sources.  Petitioner’s advances were used, initially           
          as startup capital and later for the operation and overhead of              






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