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commercial report, and forgive the remaining intercompany
receivable of $761,228. Respondent argues, nevertheless, that
G�nther’s stock had value because petitioner received a
promissory note of DM 5 million under which GAI promised to make
installment payments for G�nther’s stock. We do not think that
the receipt of a promissory note in April 1994 demonstrates that
G�nther’s stock had value as of May 31, 1992. The amount of the
bank loans petitioner assumed, combined with petitioner’s
additional advances to G�nther during FYE 1993 and 1994,
substantially exceeded the face value of the promissory note.
The promissory note obligated GAI to pay petitioner DM 5,000,000
only after petitioner had reconfigured G�nther’s balance sheet by
eliminating a substantial part of G�nther’s fixed and contingent
liabilities as of the date of sale. If anything, the terms of
the sale support our conclusion that G�nther’s stock was
worthless as of May 31, 1992. G�nther’s continuing financial
problems effectively forced petitioner to provide economic
benefits worth millions to GAI to facilitate the sale.
In a nutshell, respondent’s argument is that G�nther was
merely undergoing a downturn and that, with sufficient
recapitalization, it would make a full recovery. In support of
his argument, respondent notes that G�nther has become marginally
profitable in the hands of GAI in the years following
petitioner’s sale of the company. While this point appears to
weigh against our conclusion that G�nther lacked potential value,
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