- 8 -
In addition to the advances mentioned above, petitioner
transferred money to Kenilworth or to other parties (e.g., Bear
Stearns and Prudential Bache) on Kenilworth's behalf. Petitioner
treated these transfers similarly to the advances above. These
transfers were contemporaneously recorded in petitioner's books
as "loans", and petitioner intended at the time of each transfer
that the transfers would be repaid by Kenilworth. Both
petitioner and Kenilworth treated these transfers as demand
loans, and Kenilworth regularly repaid all of these transfers
within 90 days of the transfer. Prior to the Crash, petitioner
received timely repayment of all of its debts that were due from
Kenilworth. (Hereinafter, we collectively refer to the transfers
and advances as advances.)
Kenilworth owed petitioner over $18 million in advances as
of the last day of Kenilworth's 1987 taxable year. Petitioner
had advanced Kenilworth approximately $15 million of this sum to
support the cross-collateral and guarantee agreements.
Petitioner's board of directors (Board), following its evaluation
of the receivable from Kenilworth in consultation with advisers
(including petitioner's independent accountant (C.P.A.), a
certified public accountant who was extremely familiar with the
business and operation of petitioner, of Kenilworth, and of the
other related entities), unanimously agreed at a duly held board
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011