Electric Controls and Service Co., Inc. - Page 8

                                        - 8 -                                         
          February 1989 contract.  The $340,148 that Clinch River owed                
          suppliers and subcontractors under the February 1989 contract was           
          never paid, and petitioner never received any payments under the            
          provisions of the November 1988 contract that were dependent on             
          the mill's profitability and production.                                    
               By February 28, 1989, several priority deeds of trust had              
          been filed in Tennessee by other creditors against Clinch River             
          and perfected against the mill and other property of Clinch River           
          in the total amount of $4,469,999.                                          
               On March 19, 1989, yearend closing adjustments were made on            
          petitioner's books and records with respect to petitioner's                 
          taxable year ending February 28, 1989, reflecting a reduction in            
          the contract price for petitioner's renovation of the mill from             
          the original $5,136,000 to $4,500,000.  On petitioner's books and           
          records, petitioner recorded this adjustment as a debit (or                 
          reduction) of $636,000 in accrued income and as a credit (or                
          decrease) of $636,000 in petitioner's accounts receivable with              
          respect to Clinch River ($5,136,000 less $4,500,000 (maximum                
          amount that petitioner would receive under the November 1988                
          contract on sale of the mill) equals $636,000).                             
               Petitioner also made a yearend closing adjustment on its               
          books and records with respect to petitioner's taxable year                 
          ending February 28, 1989, to reflect the $340,148 that petitioner           
          would not receive because Clinch River had agreed to pay the                
          $340,148 directly to suppliers and subcontractors but that                  




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011