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machinery, equipment, inventory, land, building, improvements,
furniture, and fixtures; and (2) intangible assets such as
computer lists, software, goodwill, covenant not to compete,
trade name, and trademark. New Manchester, in turn, assumed
$12.8 million of Old Manchester's liabilities including a secured
trade debt. New Manchester was able to obtain financing for the
asset purchase secured by the assets purchased from its
predecessor. The loan amounts also provided New Manchester with
working capital. Also, at the time of the asset purchases, Old
Manchester amended its Articles of Incorporation and changed its
name to E&M Investments Co.
New Manchester, however, suffered from a severe economic
downturn due to a variety of outside factors. The steel company
suffered significant and continuing operating losses, and,
consequently, was unable to complete orders and attract business
in a timely and profitable manner. Subsequently, the owners of
New Manchester were unable to find a purchaser for the assets of
the company.
In that regard, New Manchester claimed a $10,102,289 loss
from its trade or business activities on its 1991 Federal income
tax return. In the following year, the company claimed a loss of
$10,751,953 from its trade or business activities on its 1992
Federal income tax return.
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Last modified: May 25, 2011