Foretravel, Inc. - Page 19

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            million, of which $2.4 to $2.5 million was owed to petitioner.                                 
            Northwest had lost $1,663,189 in its year ended December 31,                                   
            1988, and through June 1989 had lost approximately $600,000.                                   
            After Golden had the Axley & Rode tax department research the                                  
            question, he advised petitioner to deduct the Northwest                                        
            receivables as a bad debt.                                                                     
                  By the end of June 1989, petitioner believed that Northwest                              
            could not pay, and did not have the potential to pay, the                                      
            existing receivable balances.  Mr. Fore was concerned that                                     
            Northwest's situation could cause bad publicity among potential                                
            customers and have a negative impact on petitioner.                                            
                  On June 30, 1989, petitioner wrote off as a bad debt the                                 
            following items attributable to Northwest:  Trade accounts                                     
            receivable in the amount of $54,438.13, which included                                         
            advertising, insurance, and other expenses that petitioner paid                                
            on Northwest's behalf; notes receivable in the amount of                                       
            $885,373.10; and unit accounts receivable in the amount of                                     
            $1,758,847.50.  The notes receivable in the amount of $885,373.10                              
            consisted of the note dated October 11, 1988, in the amount of                                 
            $345,000, the note dated November 4, 1988, in the amount of                                    
            $385,000, and the note dated May 24, 1989, in the amount of                                    
            $132,390.10.  The remaining $22,983 in the notes receivable                                    
            account consisted of the loan to Northwest in 1985 when                                        
            petitioner acquired 51 percent of Northwest's stock.                                           






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