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and the McMahon Note, therefore, would not become immediately due
and payable.
On March 4, 1988, petitioner refinanced the Burke Property.
Petitioner borrowed $475,000 from San Francisco Federal Savings
(San Francisco Loan) and paid off the remaining $323,731.51
balance of the TIAA Loan and the Owen's Financial Loan, the
remaining balance of which was $86,181.50. Respondent has
conceded that petitioner was entitled to deduct the interest on
the San Francisco Loan in 1989 and 1990. But the 1988 interest,
which substantially contributed to petitioner's net operating
loss for that year, has not been conceded to be deductible.
The San Francisco Loan required petitioner to pay $3,994.06
interest and principal monthly, beginning on April 1, 1988, and
continuing every month thereafter for 12 months. Afterward, the
note established a new monthly payment for the next 12 months
depending upon market interest rates. The total of the payments
required in 1988 was $35,946.54.
The interest rate of the loan was fixed at 9.5 percent for
the first 6 months of the loan. After that, the interest rate
varied from month-to-month in accordance with current market
interest rates. As of the end of 1988, the interest rate on the
San Francisco Loan had increased to 11.307 percent.
As previously stated, petitioner controlled several
subsidiaries over the years. These were Controlled Casting
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