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Plant and Ware Place are parcels of land and facilities in South
Carolina.
In 1982, petitioner and his brother bought Swirl's main
manufacturing and distribution facility for $625,000 (facility
purchase). Petitioner and his brother each executed a purchase
money mortgage for $312,500. The purchase money mortgages
required petitioner and his brother to pay interest for the first
5 years and to repay the principal over 10 years. Petitioner and
his brother rented the facility to Swirl. Petitioner's share of
Swirl's rental payments was about $140,000 per year starting in
1985.
Swirl's net sales and net profits (losses) were as follows:
Fiscal Year Net Sales Net Profits (Loss)
1983 $19,450,740 ($23,342)
1984 21,692,838 (260,531)
1985 21,453,412 101,728
1986 18,108,296 (658,144)
1987 16,127,276 (272,197)
96,832,562 (1,112,486)
In May 1985, petitioner lent $270,000 to Swirl. The May
1985 loan was subordinated to the claims of all Swirl creditors.
Swirl paid about $30,000 of interest each year to petitioner on
this loan.
In 1986, Swirl ended its licensing agreement with Bill Tice,
one of its designers. As a result, Swirl had losses. Shortly
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Last modified: May 25, 2011