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VIII. California and New Jersey Expansion
A. California
The Medieval Times group began to expand its operations. On
December 15, 1987, Glendale Castle, Inc. (GCI), was incorporated
in California. GCI filed 1987 (fiscal year December 23, 1987, to
November 30, 1988) and 1988 Federal tax returns that stated that
GCI was an inactive corporation. GCI’s articles were amended on
December 13, 1988, to change the name of GCI to the San Diego
Castle, Inc. (SDCI). The amendment stated that it had been
approved by the board of directors. In December 1988, GCI/SDCI
entered into a lease, signed by A. Gelabert, for vacant land in
Carlsbad, California. A. Gelabert also signed papers in the name
of GCI/SDCI on an application for a change of zoning to
accommodate the new castle facility and on an agreement for the
payment of a public utilities fee.
MDT maintained an account entitled “Advances - San Diego
Castle”. The first entry was June 15, 1988, and the last entry
was November 30, 1990. The expenses included payments to the
City of Carlsbad, C&L, an engineering company, and marketing fees
to RC. MDT deducted these expenses on its Federal tax returns in
the amounts of $18,633 and $128,775 in 1988 and 1989,
respectively.
In December 1989, after the Carlsbad Planning Commission
denied GCI/SDCI’s project because of traffic problems, GCI/SDCI
withdrew its application from the planning commission. A
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