dismissed all of the directors, except himself. As sole director, Mr. Kluener declared, effective June 25, 1990, a distribution to himself of $2,176,000, to be paid by July 31, 1990, representing the remaining amount of the proceeds of the horse sales and the earnings thereon held in the Legg Mason account in the name of APECO Equine. The balance of the Legg Mason account was distributed to Mr. Kluener during July 1990. APECO's president was unaware of the distribution when it occurred. The timing of the distribution was set with the assistance of Mr. Kluener's tax advisers. For its year ending June 30, 1990, APECO had no current or accumulated earnings and profits, and the distribution was treated as a nontaxable return of capital. The transaction involving the horses was reflected in APECO's financial records for the first time when its audited financial statement for the year ending June 30, 1990, was prepared. APECO's audited financial statement for its year ending June 30, 1990, describes the transaction involving the horses as follows: In August 1989, the Company's shareholder contributed equine property to the Company with the intent of selling the property and utilizing the Company's tax loss carryforwards to shelter the gain on the sale. The contribution to capital of this nonmonetary asset was valued at the net proceeds from the sale of the property which took place within two months of the contribution. Such value was $2,152,288. In June 1990, the Company declared a distribution of $2,176,000 which was paid in July 1990. This distribution was recorded as a reduction of additionalPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011