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improvements to the property at great expense. These investments
would likely have enhanced the premium value of the lease. Not
long after the opening of its gallery at the Avenue Matignon
address, the French subsidiary entered into a second lease for
the use of display space in the Hotel George V. The record does
not disclose the terms of this lease or the amount of any costs
that the French subsidiary may have incurred for acquisition or
improvements.
Most of the paintings offered for sale at the Paris gallery
had been acquired from WFGI on consignment. During the years at
issue, when one of these paintings was sold, the parent would
record a sale of the painting to the subsidiary at 65 percent of
the net retail price, and the subsidiary would record this amount
as its cost for the painting. Amounts due WFGI on account of the
subsidiary's sales were payable in U.S. dollars translated at the
exchange rate prevailing at the time of sale. On the other hand,
amounts earned by the subsidiary as commissions for purchasing,
shipping, and export services on behalf of the parent were
payable in francs. The cost of sales account payable to the
parent and the commissions account payable to the subsidiary were
the two major components of the overall intercompany account
during the years at issue.
No promissory notes were executed to evidence indebtedness
on the intercompany account. There was no stated maturity date,
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Last modified: May 25, 2011