- 23 -
Remodeling work began in October 1991. In November county
officials closed petitioner’s complex because the remodeling had
been undertaken without a permit. The work was allowed to resume
in January 1992 on the condition that most of it be redone in
accordance with county specifications. Remodeling was completed,
and petitioner reopened in the following month.
The need for parking space was only one of the reasons that
petitioner’s management looked for real estate during the years
at issue. Hagerman was always interested in opportunities to
expand the adult entertainment business to new locations. In the
spring of 1989 Hagerman negotiated for the purchase of a nearby
video store for a price of $163,000. In a letter to her attorney
dated April 10, 1989, she explained her intentions: “This
purchase should be in my name I think. Maybe we will get a
corporation later. What do you think? I plan to have a
partner.” A draft sale agreement dated May 1989 records the
purchaser as “Platinum Paradise, Inc., a California Corporation
to be formed.” Hagerman discussed a number of potential
acquisitions with Mohney and made some inquiries. At Mohney’s
suggestion, in 1991 she traveled to Melbourne, Australia, to look
at a brothel advertised in the Wall Street Journal. At one time
Mohney identified a chicken ranch in Nevada, and at another a
golf course in Mexico. Petitioner reported no real estate
holdings on Schedule L of its U.S. Corporation Income Tax
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011