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The Termination Agreement recited that MPC owed $2,950,256
to MIT 84, and it offered to pay $2,262,253 by transferring to
MIT 84 the $3,035,000-note made by Qulart to Machise, now held by
MPC, with a current unpaid balance of $2,262,253. MIT 84 thus
settled its receivable for MPC for $688,003 less than it was
owed. This amount was again termed a "Contract Renegotiation
fee." No formal assignment of the note, however, was ever made.
The Termination Agreement also required MIT 84 to distribute
the Qulart note for $3,035,000 to its partners, who were to
direct MIT 84 to assign that note to Qulart in payment of amounts
they owed Qulart on their investor notes. No formal assignment
of that note was ever made. The partners' investor notes,
however, were marked "Paid 1-1-88".
MIT 84 reported partnership taxable income of $546,300 for
1986 and, by virtue of having changed its accounting method,
$1,360,877 for 1987, $23,899 for 1988 (reflecting a deduction of
the $688,003 Contract Renegotiation fee), and $1,423,786 for
1989. MIT 84 has filed one of the petitions in this consolidated
proceeding (docket No. 3461-92) seeking to have its reported
taxable income for those years reduced to zero should we
determine that MIT 84 was a sham. In the event we make such a
determination, respondent has agreed that such adjustments would
be appropriate.
None of the investors in MIT 84 ever received any cash
return on his or her investment in MIT 84.
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