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Travel and Automobile Expenses
For 1989, HPD-Latigo deducted $8,249 as “travel expenses” to
entertain several Saudi investors in Cambridge Financial, Inc., and
their entourage, by taking them to Utah to see summer snow.
Additionally, HPD-Latigo deducted $7,379 in automobile expenses
incurred for the use by the Saudi investors of a limousine (owned
by petitioners) and driver.
Funds Advanced to C Corporation
Over the years, petitioners made advances to HPD; these
advances were made to salvage petitioners’ investment in HPD.
Several of these advances were reflected in the minutes of HPD board
of directors’ meetings, as follows: (1) On September 1, 1987, the
directors ratified borrowings of $1,688,084.35 from petitioners that
occurred between December 18, 1986, and September 1, 1987. Of this
amount, HPD had repaid $395,926.18, and (2) on October 15, 1987, the
directors approved borrowing of $310,000, at an unspecified date,
from petitioners. With respect to this advance, HPD’s vice
president executed a note, dated October 15, 1987, for $300,000,
payable in 36 months from the date thereof. No interest was stated.
HPD repaid only a portion of these advances. Apparently
repayment was by an accounting entry (debit to “loan to
stockholders”) rather than the payment of cash. The balance sheets
of HPD reflect the following balances in the “loan to stockholders”
account:
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Last modified: May 25, 2011