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The Schedule L--Balance Sheets included in petitioner’s
income tax returns for these years further reflect the following
total assets and net assets and equity (without regard to
petitioner’s obligation to make future payments to Mr. and Mrs.
Myers or to respondent’s contention that the $77,237 of advances
should be treated as equity):
Net Assets/
FYE July 31 Total Assets1 Equity2
1987 $131,216 $31,405
1988 182,088 101,931
1989 207,373 134,073
1990 218,956 172,011
1991 254,634 218,462
1992 255,443 221,554
1993 361,949 282,989
1994 591,366 475,808
1995 547,656 534,443
1996 378,684 378,542
1Petitioner’s cost for the assets, less accumulated
depreciation.
2Total assets, less liabilities, which equals capital
stock of $10,000, plus retained earnings.
From incorporation in late 1986 through July 31, 1996,
petitioner declared and paid no formal dividends.
Around 1994, Mr. and Mrs. Myers decided they would no longer
seek to increase the size of petitioner’s business. Shortly
thereafter, Mr. Myers helped his son, Kurt Myers (Kurt),
establish another foundation and flat work construction company,
Myers Foundations, Inc. (Myers Foundations). Mr. Myers owned 51
percent of the outstanding shares of stock of Myers Foundations
and Kurt owned the other 49 percent. Mr. Myers served as vice
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