Ward AG Products, Inc. - Page 7

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          the record, no one but Ward was willing to extend credit to them.           
          Ward did not require them to provide collateral.                            
               Around 1986 or 1987, Major Thomas (Thomas) was a cabbage               
          farmer who owed Ward some money.  Ward helped Thomas to obtain              
          financing by signing a bank note with Thomas.                               
               Charles C. Owen, Jr., and a Mr. Parker owned farms.  At a              
          time not specified in the record, they could not pay their bills            
          to petitioner.  Ward helped them to obtain financing by signing a           
          note (not otherwise described in the record) with Owen and Parker           
          Farms.                                                                      
               Around 1993, Ward told Wells that a farmer named Morgan owed           
          money to Ward but that Morgan did not have enough equipment to              
          operate his farm.  Ward asked Wells to use Wells' equipment to              
          plant potatoes on Morgan's land so that Morgan could repay Ward.            
          Ward furnished all of the chemicals and advanced a salary to                
          Morgan.  Wells and Ward operated the harvester.  Wells agreed to            
          help Morgan because Ward had done a lot for Wells.  Morgan did              
          not pay Wells for his help.  Ward and Wells also helped two other           
          unnamed farmers at times not described in the record.                       
               Ward died on September 12, 1994.  Most of the farmers in the           
          Hastings area attended his funeral.                                         
          D.   Petitioner's Financial Statements and Tax Returns                      
               1.   Financial Statements                                              
               Petitioner used the cash method of accounting for its income           
          tax returns and some of its financial statements.  Petitioner               



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