- 7 -
petitioners reported the gain from this sale under the
installment method. Petitioners did not introduce into evidence
a copy of their 1977 Federal income tax return.
In 1979, the Reeds sold their interest in Arizona Marine to
Mr. and Mrs. Lee Lieberman. Petitioners agreed to the release of
the Reeds from their obligations, and the substitution of the
Liebermans. The Liebermans executed a promissory note dated
October 1, 1979, in the amount of $117,464.48, payable to
petitioners. The Liebermans also granted petitioners a security
interest in certain inventory and equipment of Arizona Marine.
The record does not disclose how petitioners treated this
transaction on their 1979 Federal income tax return.
In 1980, the Liebermans defaulted under the promissory note
and petitioners filed an action for injunction and forcible entry
and detainer against Arizona Marine in the Superior Court of the
State of Arizona, Maricopa County. At the time of default, the
balance due on the promissory note was $112,334.25. The action
was settled under the terms of a settlement agreement and an
agreement relating to petitioners' lessor's lien and security
interest in certain Arizona Marine property. The settlement
agreement, entered into on May 9, 1980, provides:
3. [Arizona Marine] agrees to, contemporaneously
with the surrender of the premises to Burns, also
surrender to Burns the following:
(a) All of its inventory which consists of
goods, merchandise and other personal property
owned by [Arizona Marine] in connection with its
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011