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However, the circumstances under which those advances were made
show otherwise.
Soon after WMG purchased the AM and FM radio stations, those
activities went downhill. After petitioner realized that WMG was
unlikely to be capable of repaying the $3 million he lent it in
1989, he continued to advance funds to WMG to keep the company
going and to protect the value of his collateral. Petitioner
testified:
Q Now, when in 1990 did you determine that WMG was
not going to be able to repay you?
A I’m not sure of the date. It was just a
continuing deteriorating situation.
Q And as I understand your testimony, the funds that
you continued to advance to Western Media after that
point were to try and preserve what value was there in
the radio station?
* * * * * * *
A * * * What I was trying to say, and perhaps
didn’t say it very well, is that if the station goes
dark and off the air, it has no value. The value is
the license and the format and the continuing
broadcast. And that’s what I was trying to preserve.
Q I understand that. But at that point, the
advances you made after you determined that the loan
wasn’t going to be repaid was to protect what value
there was there. It was not to make interest income?
A Absolutely.
Given petitioner’s testimony and the circumstances which gave
rise to the advances, we cannot agree that those advances were
made for the opportunity of earning high returns on interest
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