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8. Whether the Estate Established Its Illiquidity After
January 2004
As part of the restructuring, the estate received $143
million in notes (subordinated to the $250 million line of
credit) from subsidiaries of Gilman Building Products and from
Gilman Paper Co.’s railroad. All of the notes were due January
31, 2004, after the record closed in this case. The $38 million
Farm Credit loan was made in October 2002, with repayment to be
completed in 10 years.
The estate contends that it was financially protected by the
notes. The estate does not contend, and the record does not
show, that the obligors would refuse to make arrangements to
fulfill their obligation to repay the $143 million in notes in
2004, or that the estate lacked legal recourse if HG refused to
do so. Respondent argued in the opening brief that the estate
could have paid its taxes and expense from repayment of the $143
million in notes. The estate did not respond to this argument.
We cannot conclude on this record that the estate needed to
borrow funds past January 31, 2004. Thus, we conclude that
interest accruing after that date on the Farm Credit loan is not
deductible.
9. Conclusion
We accept as reasonable the decision of the executors to
implement the restructuring and to borrow funds for a short
period to pay estate taxes. However, we also conclude that the
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