Larry M. Levy and Diane Levy - Page 5

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               Larry Levy filed a claim as a creditor in JTFJ’s bankruptcy            
          proceeding.  During the bankruptcy, he agreed to subordinate his            
          claim to that of Betty Jo Byers.  Ms. Byers was a JTFJ creditor             
          and former bookkeeper who lent $42,500 to JTFJ.  Larry Levy                 
          personally guaranteed the loan.  Ms. Byers received $26,008.86              
          from Larry Levy, pursuant to a judgment and subsequent                      
          garnishment of his wages.                                                   
               In August 1989, the bankruptcy court ordered the sale of               
          JTFJ’s assets to Majestic Jewelers.  Majestic Jewelers agreed to            
          pay the bankruptcy trustee $200,000 for JTFJ’s assets (i.e.,                
          $50,000 at the time of purchase and the remainder in                        
          installments).  Majestic Jewelers’ payments would go to JTFJ’s              
          secured creditors, first to Republic Bank and then to                       
          petitioners.  On November 20, 1989, the chapter 11 case was                 
          converted to a chapter 7 case.  In 1991, after making only a few            
          small payments, Majestic Jewelers defaulted on its obligations.             
          After Majestic Jewelers defaulted, petitioners were, pursuant to            
          Larry Levy’s personal guaranty, required to repay $103,622 to               
          Republic Bank.  Pursuant to the bankruptcy plan, petitioners                
          would have received the remaining payments.  Petitioners deducted           
          $445,104 as business bad debt on their 1991 tax return and                  
          claimed a net operating loss carryover on their 1992 and 1994 tax           

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Last modified: May 25, 2011