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As of November 1, 1990, the fair market value of the L&C
Properties and the related land was no more than $1,750,000.
In February and June of 1991, foreclosure sales of the L&C
Properties occurred with Cal Fed the highest bidder and ultimate
purchaser.
From 1981 through 1991, employees of SAWIA maintained the
books and records relating to income and expenses of L&C Springs
and the L&C Properties, and SAWIA and other accountants prepared
and filed L&C Springs' Federal partnership income tax returns.
For 1981 through 1986, years not in issue, Weisgal and other
accountants filed Federal partnership income tax returns on
behalf of L&C Springs, reflecting substantial net operating
losses of L&C Springs, accrued interest expenses on the L&C Note
to Tanglewood, and accelerated depreciation expenses relating to
the L&C Properties. These substantial claimed tax benefits were
passed through to L&C Springs' limited partners.
For 1987, 1988, 1989, and 1990, Weisgal or other accountants
also prepared and filed on behalf of L&C Springs, Federal
partnership income tax returns reflecting, among other items,
accrued interest on the L&C Note and depreciation expenses
relating to the L&C Properties. These claimed interest and
depreciation expenses for just 1988, 1989, and 1990, totaled
approximately $1,285,011. On none of L&C Springs’ partnership
income tax returns for those years was income or gain reported
relating to cancellation of the L&C Note or a termination or
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