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condemnation award in 1989, and that it realized a $1,789,785
gain with respect thereto ($1,837,500 award less $47,715 adjusted
basis). MIC reported that it was electing not to recognize this
gain in accordance with section 1033, and that it had purchased
other property similar to or related in use in an amount greater
than the gain.
MIC retained James, Peter, and Richard Hafiz to assist MIC
during the condemnation proceedings, and James Hafiz negotiated
with MIC's management the amount of compensation that he and his
sons would receive for their assistance. MIC sought assistance
from people with personal knowledge of the Property, and James,
Peter, and Richard Hafiz made themselves available to assist
appraisers and counsel as necessary. James, Peter, and Richard
Hafiz also performed various jobs to enhance the value of the
Property. Peter Hafiz, who had attended college to learn
architectural drafting and art, sketched MIC's real estate and
fixtures, and he diagramed the building's interior. Peter Hafiz
worked more hours than Richard Hafiz.
On April 24, 1989, MIC paid James, Richard, and Peter Hafiz
lump-sum amounts for their services. MIC paid nothing to Eleanor
or Stuart Hafiz because they did not perform any services for MIC
in connection with the condemnation. Respectively, James,
Richard, and Peter Hafiz received $35,000, $10,000, and $20,000.
MIC issued each of these men a 1989 Form 1099-MISC, Miscellaneous
Income, for the amount that it paid him. MIC deducted the
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