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Pioneer and HSC, HSN made the following payments to Pioneer,7 and
Pioneer included these amounts in its income:
Calendar Year Amount
1985 $56,011.30
1986 700,645.57
1987 2,434,457.52
1988 2,453,928.21
1989 2,637,191.00
1990 3,136,668.00
1991 3,639,988.00
1992 3,441,262.00
Mr. Speer sold his HSN stock to Liberty Media Corp. (Liberty) in
February 1993. After the sale, HSN discontinued making the 1-
percent license payments to Pioneer. After engaging in various
litigation, HSN agreed to pay Pioneer approximately $4,500,000 to
terminate the License Agreement.
Passive Activity Loss Issue
During 1988, 1989, and 1990, Mr. Speer and Mr. Paxson owned
51 percent and 49 percent, respectively, of the stock of Gateway
Marine, Inc. (Gateway). Gateway was an S corporation that
operated a marine tug and barge business. Mr. Speer set up the
corporation, hired its employees, handled finances, discussed the
company’s bids, and purchased equipment for the company.
Petitioners reported losses from Gateway of $24,882, $77,909, and
7We note that the 1-percent payment by HSN to HSC under the
License Agreement terminated in early 1986, when HSC merged into
HSN. HSN continued to pay Pioneer the 1-percent license fee.
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