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the performance of Cold Spring's accounts receivable after the
sale.
Also pursuant to the sales agreement between Cold Springs
and Puro, petitioner's son was offered employment with Puro,
which he declined. Instead, after the sale of Cold Springs to
Puro, petitioner's son went into the catering business, doing
business as Hamilton Caterers, Inc. (Hamilton). Petitioner's son
purchased Hamilton for $650,000. He paid $100,000 in cash and
obtained seller financing for $550,000. Petitioner's son was the
sole owner of that business.
In connection with the operation of Hamilton, petitioner’s
son borrowed funds from the Jerry Kaplan Company of New Jersey
(Kaplan) in the approximate original amount of $80,000 during
1992 (the Kaplan loan). As security for the Kaplan loan,
petitioner’s son pledged the income stream due to Cold Springs
from Puro to Kaplan.2
2 At trial, petitioner’s son testified that he was an officer
and director of Cold Springs and had the capacity in that
position to pledge the Cold Springs assets as security for the
loan from Kaplan. As a 51-percent shareholder, petitioner
appears to have had the ability to block her son from pledging
the income stream. Whatever power she had to block the pledge,
however, she did not exercise it, as, in her words, she stated:
“Well, my husband and my son always took care of the business
affairs. I was not knowledgeable about that.”
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Last modified: May 25, 2011