Neal T. Baker Enterprises, Inc. - Page 4

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               formerly carried on by Neal T. Baker Enterprises.  He                  
               further stated that the two businesses were for all                    
               practical purposes totally unrelated, and that it had become           
               necessary to conduct the two businesses separately in order            
               to facilitate flexibility, expansion, cost control, proper             
               management and the raising of capital.                                 
                                                                                     
          Mr. Baker testified that the restructuring was in part to prepare           
          Baker's Burgers, Inc., for a possible public offering.                      
          Petitioner transferred assets (valued at $36,000) to Baker's                
          Burgers, Inc., in exchange for stock of Baker's Burgers, Inc.  As           
          a result of the restructuring, petitioner held real estate                  
          holdings, which included buildings for fast-food locations (which           
          were leased to Baker's Burger, Inc.), real estate held for                  
          investment, and real estate held for development.  After 1969,              
          petitioner continued to construct additional fast-food locations,           
          and also continued to contract with third parties for the                   
          construction of residential properties.                                     
               In regard to its construction operations, petitioner had a             
          contractor's license with the State of California, but it did not           
          have any contracting equipment.  All the contracting work was               
          done through subcontractors.  Petitioner recorded the work done             
          (payments) by its subcontractors under work-in-                             
          progress/construction in-progress accounts.  Petitioner used                
          realtors to sell its properties.  Petitioner recognized revenue             
          from these sales when escrow closed.                                        
               On February 1, 1983, petitioner filed its restated articles            
          of incorporation with the State of California, providing the                




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