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A. Well, first of all I asked Mr. Garrett if he could
come up with something to verify that basis in more
detail. He went--he came back and said that he had
acquired these cars over years and years, and he had
traded some, and he had improved some, and he didn't
really have the detailed records.
But I did require him to sign, not exactly an
affidavit but something that was to the best of his
ability. And then I also, since I had known him for
ten years, and I have a reputation as a CPA, I wanted
to at least be satisfied that he had acquired enough
net worth outside of the company to allow him to
acquire that kind of inventory of vehicles.
So I did a little worksheet, kind of a mental
worksheet, as to if that would be possible, and I
decided that, yes, he would have had enough personal
assets to acquire that.
Q. So at that point, you were satisfied that he had
the after-tax resources to have invested $800,000 in
the cars he sold in 1988?
A. Yes, I did.
Q. Okay. Would you step us through the mental
process you went through in proving that $800,000 basis
to yourself?
A. Well, just in--there is three aspects of that
calculation, and the biggest one is that each year,
pretty much from 1980 through '89, which is nine years,
we would bonus him out approximately $100,000 a year at
the end of the year to cover some of the items that we
considered to be personal.
And I presumed the majority of that was for muscle
cars, because he had a regular salary of 3,000 a month
for his living expenses. So that is approximately 8-or
900,000; after tax, it would be maybe $500,000.
That was the first and largest part of the
calculation. The second one was the loan balance.
Even after these bonuses, he still had a loan balance
with the company of in excess of $300,000. And there
again, I presumed that the majority of that was for
these type of personal muscle cars.
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