- 10 -
Date Balance
Jan. 1, 1989 $5,596,306
Dec. 31, 1989 6,088,816
Dec. 31, 1990 4,938,755
Dec. 31, 1991 7,810,284
Dec. 31, 1992 7,240,802
Dec. 31, 1993 7,173,905
Dec. 31, 1994 6,873,007
Petitioners made a series of loans totaling $125,000 to Mr.
Saab in 1989. On February 11, 1992, Mr. Saab filed a chapter 7
bankruptcy petition, and the loans he owed to petitioners were
discharged.
Tax Returns
On its 1989 Form 1120, U.S. Corporation Income Tax Return, HPD
reported a $16,972 loss.
On its 1989 Form 1120S, U.S. Income Tax Return for an S
Corporation, HPD-Latigo reported $1,145,203 as its distributive
share of partnership profits from Malibu Cedars. (HPD-Latigo had
no other income.) HPD-Latigo claimed deductions of $610,823 on its
1989 return, as follows: $300,000 as a profit participation fee,
$19,073 as travel expenses, and $291,750 as amortized capitalized
costs.
On their 1989 Form 1040, U.S. Individual Income Tax Return,
petitioners reported $430,914 as their distributive share of profits
from HPD-Latigo. Petitioners did not report any interest income
from HPD on either their 1989 or 1990 Federal income tax return.
As of December 31, 1994, neither petitioners nor HPD treated any
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