paid in capital. The distribution was intended to
return the 1989 capital contribution plus earnings on
the invested funds to the shareholder. The shareholder
then loaned $176,000 to the Company. The transaction
also reduced the tax loss carryforward for tax purposes
by $1,210,200.
APECO's audited financial statement for its year ending June 30,
1990, also stated that APECO might not be able to continue as a
going concern in view of its losses, and APECO's balance sheet as
of that date reflected negative shareholder's equity of
$2,308,869.
The $2,176,000 that Mr. Kluener received as a distribution
from APECO was used as follows: On July 27, 1990, he repaid a
$400,000 loan from Ms. Kluener; also on or about both that date
and September 10, 1990, he made loans of $600,000 and $176,000,
respectively, to APECO; on or about both September 10 and
December 31, 1990, he made payments of $500,000 to Fifth Third to
reduce his personal indebtedness.
The horse sales were reported on APECO's Federal income tax
return for its taxable year ending June 30, 1990, and no tax was
paid with respect to the sales because the gain realized was
offset against APECO's NOL's. The Klueners did not report the
sales on their Federal income tax return for 1989.
During 1991, Mr. Kluener made loans to APECO as follows:
Approximate Date Amount
Jan. 30 $250,000
Mar. 22 75,000
Mar. 27 75,000
May 7 204,000
July 29 400,000
Sept. 23 400,000
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