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 additional
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011