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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
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