- 10 -
percent of the financing Blair obtained and 10 percent of Cabana
Boy’s profits from the Neuromancer project.
On September 27, 1988, Mrs. Rosenberg (individually), Cabana
Boy, Keith Cavele (a London producer), and Motion Picture Finance
Company Ltd. (a London firm) borrowed $50,000 from Warren Harris
(Harris) for the Neuromancer project. The loan agreement
provided that Harris would receive repayment with 25 percent
interest and 2.5 percent of any profits from the film.
On October 19, 1988, Fabricant obtained about $2.2 million
by mortgaging petitioners’ residence. Petitioners used the
proceeds to pay a previous mortgage of about $1 million and to
finance Cabana Boy.
G. Cabana Boy Financial Statements
Hyman prepared unaudited financial statements for Cabana
Boy’s taxable years ending November 30, 1987 and 1988, from
information provided by management. In the financial statements,
Hyman treated the payments that petitioners made to or on behalf
of Cabana Boy as loans. Hyman did not express any opinion as to
the accuracy of the information provided by Cabana Boy when he
prepared the Cabana Boy financial statements. The financial
statements indicated that Cabana Boy owed petitioners $137,102 on
November 30, 1987, and $953,505 on November 30, 1988. Hyman also
reported the following on Cabana Boy's 1987 and 1988 financial
statements:
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Last modified: May 25, 2011