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transfer of the window-washing business, Mr. Maranto stated: "I
can only assume so. You know, that's not information I'm privy
to."
Mr. Maranto testified that he did not fill out either a
credit or loan application before receiving funds pursuant to the
Universal Notes or the Credit Agreement. The Universal Notes
were unsecured. Four of the notes had a 5-percent interest rate,
while one bore no interest at all. The terms of the Credit
Agreement provided petitioners with an unsecured line-of-credit
for $25,000 at 5-percent interest. When asked by respondent how
he was able to obtain such favorable terms, Mr. Maranto testified
that he simply "negotiat[ed] with the [Herkeios Group's]
information officer who trusted me".
Mr. Maranto further testified that he and Mrs. Maranto did
not receive any consideration for the transfer of their window-
washing business to the Herkeios Group. Rather, petitioners paid
$2,950 to Freedom Enterprises for a trust package used to
transfer the business to the trust. Moreover, Mr. Maranto served
as general manager of the trust in 1991 but reported compensation
of only $2,450. On their Schedule C for 1991, petitioners
reported a net profit from the business of only $4,206.23, and
this amount included Mr. Maranto's compensation from the trust.
On their Schedule C for 1990, petitioners reported a net profit
of $43,920.
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