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defendant to recoup some or all of the legal fees incurred, a
judgment was entered against petitioner in the approximate amount
of $70,000.
By October 1, 1984, the Shaktoolik projects were
substantially complete and operational, and INI had received
payments totaling $1,875,000. The gross receipts reported on
INI’s TYE 9/84 U.S. corporation income tax return amounted to
$1,665,000. INI's TYE 9/84 return reflects taxable income of
$87,177 after deductions. INI reported officer's compensation
and wages on line 12 of the TYE 9/84 return in the amount of
$165,000 and bonuses on line 26 in the amount of $63,800. The
$165,000 shown on line 12 of INI’s TYE 9/84 return includes the
deduction for $100,000 attributable to the accrual of the bonus
payable to Burke’s estate.
Shortly after Mutual Life denied the insurance claim,
petitioner and Thorpe discussed the buy-sell agreement. During
this discussion, petitioner told Thorpe he would pay $150,000 for
the stock. Petitioner did not try to rescind the buy-sell
agreement or reduce the purchase price of the stock; he simply
tried to extend the time over which he had to pay.
Later, during fall 1984, petitioner suggested to Thorpe that
the estate could be paid faster, on the rationale that a layer of
taxation could be eliminated, if the buy-sell agreement were
reformed, nunc pro tunc, to reduce the purchase price by $100,000
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