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approximately 13 months of heated and contested court proceedings
and discussions related thereto. Under the terms of the
settlement, the City agreed to deliver a $1,837,500 check to MIC
in satisfaction of all claims that could be made with respect to
the Property's condemnation. The City prepared a written
settlement agreement that was signed by the City, on the one
hand, and MIC, Beverly, and James, Eleanor, Peter, Richard, and
Stuart Hafiz, on the other. The agreement, dated February 14,
1989, stated that the parties thereto agreed that the settlement
resolved all claims, including the value of the real estate,
going concern value, and covenants by MIC, Beverly, and the Hafiz
family not to operate an adult business in the area. The
agreement did not set forth a value for any specific claim.
Petitioners and the Hafiz family were advised there was little
value to the covenants.
On February 14, 1989, the commissioners filed with the court
an award of damages in the amount of $1,837,500. The
commissioners set their award at the amount listed in the
settlement agreement. On February 16, 1989, MIC transferred the
Property to the City by quitclaim deed, and, on March 3, 1989,
MIC received a check payable solely to it in the amount of
$1,837,500. There was no deed or bill of sale given for goodwill
or going concern value. On its 1989 Form 1120, U.S. Corporation
Income Tax Return, which MIC filed with the Commissioner on
January 3, 1992, MIC reported that it had received the $1,837,500
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