William King Alt and Barbara G. Alt - Page 4

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          mortgaged their home as security for the loan.  The $42,000 came            
          from petitioners’ savings.                                                  
               Shortly after Michael purchased the business, serious                  
          competition arose in the pet store business.  A new Wal-Mart                
          store opened in Lexington, Kentucky, and competed directly with             
          Michael’s business.  Then another large pet store opened.  By               
          1999 or 2000, Michael became insolvent, and it became clear that            
          Michael’s independently owned smaller store could not survive.              
          The store was closed, and Michael filed for bankruptcy under                
          Chapter 7 of the Bankruptcy Code.  Michael’s indebtedness to                
          petitioners was unpaid, except for a few monthly payments he made           
          to the bank in the earlier years prior to his insolvency.                   
          Petitioners filed a proof of claim in the bankruptcy proceeding;            
          however, there were no assets that were available to unsecured              
          creditors (including petitioners).                                          
               With respect to the $97,000 in financing that petitioners              
          provided to Michael, $55,000, as noted above, came from a loan              
          petitioners received from their local bank, which Michael agreed            
          to pay.  When Michael defaulted on the loan, petitioners were               
          required to pay.  The Court is satisfied from the record that, at           
          the time Michael purchased the store, petitioners fully expected            
          that the $55,000 of indebtedness to the bank was an indebtedness            
          that Michael was liable for.  At the time of the purchase,                  
          petitioners consulted an attorney, and, based on that attorney’s            

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