- 34 -
Mrs. Harrison to sign the guaranties, responded that the bank
“wanted additional strength or support behind * * * [the
collateral], and with her liquidity base, it was important to
have her involvement.” But it is entirely possible that Mr.
Summers would have provided a similar response had he been asked
why the bank had required guaranties from Myron, James, and
Ralph. Moreover, it appears that much of Mrs. Harrison’s wealth
may have actually been attributable to the estate of her late
husband in the form of the Survivor’s Trust that acted as the
coguarantor of the $16 million replacement guaranty executed in
1998. There is no evidence as to the relative values of the
interests of Mrs. Harrison, Myron, James, and Ralph in the assets
of that trust.
Finally, the financial risk to Mrs. Harrison from
guaranteeing loans to petitioner was further reduced to the
extent that the Bank of America line of credit resulted in loans
to Rentals. Petitioner is not entitled to deduct any amount as
compensation for Mrs. Harrison’s guaranty of loans to Rentals.
See Cropland Chem. Corp. v. Commissioner, 75 T.C. 288, 292-295
(1980), affd. without published opinion 665 F.2d 1050 (7th Cir.
1981); Columbian Rope Co. v. Commissioner, 42 T.C. 800, 815-816
(1964); E.B. & A.C. Whiting Co. v. Commissioner, 10 T.C. 102, 116
(1948). Although the overall line of credit from Bank of America
to petitioner and Rentals reached approximately $7 million during
the audit years, the fact that petitioner’s total long-term debt
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011