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in the subdivision of Lot No. 12 and the financing
derived from said Lot. Under no circumstances would
the seller of property in a bona fide sale pay the
purchaser’s debt service on the financing obtained by
purchaser used to pay the purchase price to seller.
We have found the following facts with respect to the June
14, 2000 transaction. Although the funds that petitioners re-
ceived from Kevin O’Malley as a result of the December 2, 1999
transaction enabled them to satisfy certain of their financial
obligations, they needed additional funds in order to meet cer-
tain other obligations. Mr. O’Malley asked his brother Edward
O’Malley whether he would be willing to accommodate petitioners
and enable them to obtain such additional funds. Edward O’Malley
agreed to do so. To that end, Edward O’Malley and Mr. O’Malley
entered into an oral agreement under which: (1) Petitioners’
transfer of lot 12 to Edward O’Malley pursuant to petitioners’
family subdivision agreement was to be structured in the form of
a sale;33 (2) Edward O’Malley was to borrow from F&M Bank
$180,000, or 80 percent of the estimated $225,000 fair market
value of lot 12, and was to secure that loan with that lot;
(3) Edward O’Malley was to transfer proceeds of the $180,000 loan
to petitioners; (4) petitioners were to make all the payments to
F&M Bank required by the terms of the $180,000 loan; (5) the
33Edward O’Malley and Mr. O’Malley agreed to structure the
transfer of lot 12 as a sale because F&M Bank required such a
structure before it was willing to make a loan to Edward O’Malley
that was to be secured by that lot.
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Last modified: November 10, 2007