M.I.C. Limited - Page 9

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          approximately 13 months of heated and contested court proceedings           
          and discussions related thereto.  Under the terms of the                    
          settlement, the City agreed to deliver a $1,837,500 check to MIC            
          in satisfaction of all claims that could be made with respect to            
          the Property's condemnation.  The City prepared a written                   
          settlement agreement that was signed by the City, on the one                
          hand, and MIC, Beverly, and James, Eleanor, Peter, Richard, and             
          Stuart Hafiz, on the other.  The agreement, dated February 14,              
          1989, stated that the parties thereto agreed that the settlement            
          resolved all claims, including the value of the real estate,                
          going concern value, and covenants by MIC, Beverly, and the Hafiz           
          family not to operate an adult business in the area.  The                   
          agreement did not set forth a value for any specific claim.                 
          Petitioners and the Hafiz family were advised there was little              
          value to the covenants.                                                     
               On February 14, 1989, the commissioners filed with the court           
          an award of damages in the amount of $1,837,500.  The                       
          commissioners set their award at the amount listed in the                   
          settlement agreement.  On February 16, 1989, MIC transferred the            
          Property to the City by quitclaim deed, and, on March 3, 1989,              
          MIC received a check payable solely to it in the amount of                  
          $1,837,500.  There was no deed or bill of sale given for goodwill           
          or going concern value.  On its 1989 Form 1120, U.S. Corporation            
          Income Tax Return, which MIC filed with the Commissioner on                 
          January 3, 1992, MIC reported that it had received the $1,837,500           




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