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case settlement of $66,721 and the Resthaven note case settlement
of $14,695.26. The remaining amounts were paid to the attorneys.
In 1986, petitioner, as president and chairman of the board,
caused Resthaven to lend $110,000 to Albert Kamas (Kamas), a
personal friend. The loan was to help Kamas finance the
construction of a gasohol plant. Petitioner, on occasion, asked
Kamas to make payments on the loan. In 1987, Kamas informed
petitioner that he could not repay/make payments on the loan
because the project had lost its government backing. Kamas
received a discharge in bankruptcy in approximately 1992.
On May 7, 1987, Diamond Inn Enterprises, Inc. (Diamond), was
incorporated. On or about June 1, 1987, Diamond authorized the
issuance of 10,000 shares of section 1244 stock, and it received
a total of $10,000 from its three incorporators. Seventy-five
percent of Diamond's stock was issued to petitioner. Initially,
petitioner paid $7,500 to Diamond and, for 1988, deducted a
section 1244 loss in the amount of $100,000. In order to support
the claimed loss, petitioner relied on each shareholder's
postincorporation payments in amounts proportionate to his
Diamond stock ownership percentage. From its incorporation
through its failure in 1988, Diamond recorded loans from
shareholders in the total amount of $252,004. Petitioner's
accountant subsequently determined that the $252,004 should not
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