Farmland Industries, Inc. - Page 56




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             Petitioner owned 12 percent of Seaway's capital stock from               
             the company's inception until its termination in 1984.                   
                  To ensure payment of Seaway's long-term debt, its                   
             stockholders executed a Throughput and Deficiency Agreement              
             (TDA) dated February 12, 1975.  Under the terms of the TDA,              
             each stockholder agreed to deliver sufficient crude oil for              
             transportation through the pipeline, in proportion to its                
             capital stock ownership, so that revenues collected for the              
             transportation would pay all operating expenses of the                   
             pipeline and all principal and interest due on Seaway’s                  
             outstanding debt.  In the event Seaway experienced a cash                
             deficiency, the TDA obligated each shareholder to pay                    
             Seaway its proportionate share of the deficiency on the                  
             date any interest or principal payment was due, or at the                
             end of any 6-month accounting period.  Seaway and its                    
             shareholders treated these TDA deficiency payments as                    
             prepaid transportation charges, to be credited against                   
             actual charges when crude oil was transported for the                    
             paying shareholder.  On its balance sheet, petitioner                    
             credited its TDA deficiency payments to an account for                   
             prepaid expense items and debited the payments to an                     
             expense account when it actually used the pipeline.                      










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