Ernst L. Meier - Page 12




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          petitioner in the amount of $2,979,5681 and interest due to                 
          petitioner as of that date of approximately $227,9902.                      
               Between December of 1995 and February of 1996, settlement              
          agreements were entered into between Blackland, Garland Farms,              
          and a number of the tenant farmers regarding repayment of the               
          loans that the tenant farmers owed to Blackland.  Under the terms           
          of the above settlement agreements, crop production costs of                
          certain farmers were to be paid by Blackland, and in return the             
          farmers promised to transfer any crop proceeds, crop insurance              
          payments, and Government payments received first to Garland Farms           
          in payment of rent on the farm properties and then to Blackland             
          in repayment of the loans.                                                  
               In February of 1996, a number of the tenant farmers who had            
          past due loans owed to Blackland and who had not yet entered into           
          settlement agreements with Garland Farms and Blackland filed for            
          bankruptcy.                                                                 
               For the first time, on Blackland’s March 31, 1996, balance             
          sheet (and thereafter on its balance sheets for April and May               
          1996) there is reflected a “Note Receivable” from petitioner,               

          1    $3,545,020 less $565,452 ($724,480 transferred by Blackland            
          to petitioner less $159,028 of purported interest) equals                   
          $2,979,568.                                                                 
          2    A “worksheet” of petitioner’s that was stipulated to by the            
          parties reflects unpaid accrued interest for 1993 through 1995              
          owed to petitioner by Blackland in the amount of $227,990, or $20           
          less than the $228,010 interest claimed by petitioner as part of            
          the bad debt deduction in issue.                                            





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