- 49 -
Clients investing in Matric signed an agency agreement with
LTD. Pursuant to the agency agreement, clients agreed to
indemnify LTD for any potential loss and to hold LTD responsible
for paying clients their share of the interest payments remitted
by Matric only if Matric paid LTD.
LTD earned three types of income in connection with Matric
during the tax year ending June 30, 1989. The first type of
income that LTD earned was a 3-percent commission on the $10
million note, prorated for the 9 months that the note was
outstanding during taxable year ended June 30, 1989. The second
type of income that LTD earned was an initiation fee of 3-percent
of the $10 million note. The last type of income that LTD earned
was a consulting fee of $47,500. The gross receipts and direct
costs relating to LTD’s "Commissions [Matric]" for each taxable
year are as follows:
TYE June 30 Gross Receipts Direct Costs
1989 $575,000 - 0 -
d. Inversat Fund
LTD created Inversat REIT, a U.S. real estate investment
trust (REIT), to market to its clients. Clients purchased shares
in the REIT by placing funds with LTD, which in turn placed them
in its Inversat Fund. LTD then allocated the funds from the
Inversat Fund to the Inversat REIT, which purchased and managed
U.S. real estate. The Fund consisted of 5,000 shares, sold at
$1,000 each, with a minimum investment of $20,000. LTD sold all
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