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where petitioner makes loans to its shareholders and to entities
owned in part by its shareholders and in part by other members of
the same family.
Background
Petitioner is a corporation that, at all pertinent times,
had its principal place of business in Las Cruces, New Mexico.
Petitioner was engaged in cotton brokerage and, for Federal
income tax purposes, reported gross income of $1,276,431 and
$1,913,962 for its fiscal 1994 and 1995 tax years, respectively.
At all pertinent times, the shares of stock of petitioner were
owned by family members related by blood or marriage as follows:
Ownership
Shareholders (%)
William Tharp 16.8
Est. of Glenda Tharp 16.7
Charles Tharp 33.5
Claudia Keith 33.0
Total 100.0
William and Charles Tharp and Claudia Keith are all children of
Claud Tharp, who did not own any shares of petitioner. Glenda
Tharp, now deceased, was the wife of William Tharp.
During the fiscal years in issue, shareholders of petitioner
and related family members owned or had an interest in certain
entities as follows: (1) Charles Tharp and his son, Craig Tharp,
each owned a 50-percent interest in the capital and profits of
the Buena Vista Partnership; (2) the Dona Ana Land Corp.’s shares
of stock were owned in the following percentages: William
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