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transaction. A stereotypical residential purchase and purchase
money mortgage, for instance, bears many similarities.
Even the fact that payments on the loan were swept from
corporate accounts carries little weight in the highly unusual
circumstances of this case. Respondent’s position rests on the
proposition that Comerica looked primarily to Alofs and Target,
and not to Mr. Gleason or petitioners, for repayment of the $6
million. However, the relevant time for answering this question
is as of when the disbursement was made. See Delta Plastics
Corp. v. Commissioner, 54 T.C. 1287, 1291 (1970) (“Whether a
transfer of money creates a bona fide debt depends upon the
existence of an intent by both parties, substantially
contemporaneous to the time of such transfer, to establish an
enforceable obligation of repayment.”). The loan was executed in
December of 1995. By January of 1996 the entire LBO transaction
was in meltdown, and it is impossible to speculate as to how
those involved might have proceeded had the buyout and underlying
cashflow projections proved sustainable. Presumably, Comerica,
as an independent, third-party commercial entity, did not enter
the transaction expecting it to fail.
Mr. Gleason testified that the intention was for Alofs and
Target to pay dividends to him, which he would then use to make
payments on the $6 million loan. The sudden demise and
Comerica’s subsequent actions may have short circuited any such
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