14
In the settlement agreement between Lone Star and Electro,
Electro agreed to pay Lone Star the sum of $390,000. Murphy
signed an affidavit dated September 11, 1992 (affidavit), when he
settled docket Nos. 4949-91 and 5150-91 with respondent. In the
affidavit Murphy stated: "The settlement provided that Electro
would make a payment of $258,986.00 to * * * [Lone Star] and
* * * [Lone Star] would relieve Electro of all obligations under
the Lease." Murphy testified that Lone Star did not receive
payment from Eltech pursuant to the settlement.
Lone Star's Form 1065 for the taxable year 1989, dated
October 15, 1990, includes one income item under "Other income"
in the amount of $3,176. A handwritten worksheet is attached to
the 1989 Form 1065 with the following notations:
1989
Lone Star/Sale of Rights
Receipts - cash $258,986
forgiven - Debt 2,069,656
$2,328,642
less
Rights released 1,639,600
750,000 $2,389,600
loss (60,958)
interest
Murphy testified that he inadvertently attached the worksheet to
Lone Star's 1989 Form 1065. He testified that he prepared
several worksheets, and this one related to the possibility of
discounting, for $258,968, Electro's obligation to pay Lone Star
$390,000. Lone Star pursued none of these alternatives.
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