Griffin Paper Corporation - Page 17

                                       - 17 -                                         
          meetings and were treated as full members of the board.  In                 
          LRFP's minutes of its board's meetings on November 12, 1986, and            
          November 11, 1987, Griffin was described as holding a stock                 
          interest in LRFP.                                                           
               GNN’s annual reports for 1981 through 1988 reported GNN as             
          owning 95 percent of the voting stock of LRFP, and GNN’s Federal            
          income tax returns for 1982 through 1988 reported the same.  On             
          its 1987 through 1989 returns, GNN treated the 1981 transaction             
          as a sale of Griffin's shares in LRFP, and a portion of the                 
          deferred payment as unstated interest under section 483.  GNN               
          concedes that its interest deductions in 1987 and 1988 were                 
          erroneous and argues only that it is entitled to its interest               
          deduction in 1989.  On its 1989 return, GNN deducted $1,049,771             
          as unstated interest on the transaction with Griffin.  In its               
          petition, GNN claims a 1989 unstated interest deduction of                  
          $16,477,615 with respect thereto, and that it has a $5,264,409              
          overpayment of income taxes for that year.                                  
                                       OPINION                                        
               We are asked to decide the timing of Griffin's sale of its             
          LRFP stock to GNN.  GNN argues that it bought the stock in 1981             
          for a deferred payment of $31.75 million.  According to GNN, it             
          assumed the benefits and burdens of owning Griffin's LRFP stock             
          in 1981 because, as of December 31, 1981:  (1) There was only a             
          remote possibility of nonexercise of the reciprocal options and             
          (2) the Stockholders' Agreement had effectively shifted the                 




Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011