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Federal income tax purposes.11 In February 1986, LIIBV opened
accounts with ABN Bank, New York.
LIL owned all of the stock of LIIBV during the years in
issue. DeGroote was a director of LIIBV during the years in
issue. LIIBV had other directors, including Netherlands
residents. Haworth became a director of LIIBV after the years in
issue.
On October 16, 1986, Haworth (using LTI letterhead) wrote
the following to Peter Deege, a director of LIIBV:
I should advise you that at our Monday meetings we
wish to do the following:
1. Amend the loan agreements from B.V. to our U.S.
subsidiaries to provide with effect from September 1,
1986:
(a) All sums to be due on demand at interest
rates equal to ABN New York prime plus 2
percent, payable on the last business days of
each fiscal quarter.
(b) Remove all financial ratio covenants.
(c) Remove the "ceilings" so that no limits will
exist. All loans will be provided as
requested but subjected to availabilities of
B.V.'s funds.
(d) In the case of Laidlaw Transportation, Inc.'s
subsidiaries, there will be two loan accounts
established, one called principal account and
the other called reinvested interest account.
(e) To facilitate the quarterly and other changes
in loan amounts, all increases/decreases
would be entered on a grid promissory note.
This system allows the lender to adjust the
promissory note automatically without issuing
11 During the taxable years in issue, LIIBV was a foreign-
related person with respect to Transit and LWSI within the
meaning of sec. 267(a)(3) and sec. 1.267(a)-3(b)(1), Income Tax
Regs.
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