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Raul also was deposed on May 17, 1994, and he corroborated the
statements Richard made in his deposition.
On July 1, 1994, the defendants filed a memorandum of
contentions of facts and law, asserting that Cola, Inc. had
substantial capital assets, stockholders, a lease for a
manufacturing plant, and had engaged in a continuous course of
business activity since 1988.
In November 1994, the Beta Maskin lawsuit was settled. The
parties agreed that only Cola, Inc. was liable for the asserted
obligation to Beta Maskin. Richard and Raul signed the settlement
agreement as officers of Cola, Inc. A note payable was created on
Cola, Inc.'s general ledger reflecting Cola, Inc.'s obligation
under the settlement agreement.
Cola, Inc. was sued by other businesses with which it had
contracted; i.e., Axis Engineering in 1992, and Sterling Air Cargo,
Inc. in 1994. In satisfaction of the default judgment in the Axis
Engineering lawsuit, Cola, Inc. issued a check drawn on the
corporate bank account with the imprint "Cola Performance Products,
Inc."
Income Tax Returns
Petitioners timely filed Federal income tax returns for 1992,
1993, and 1994. They individually claimed losses on Schedules C of
their respective tax returns for those years with respect to the
automotive crankshaft business, as follows: Richard and his wife,
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