- 6 - On October 1, 1987, petitioner made two advances for operating capital to UPE in the amounts of $100,000 and $80,622, respectively. The advances from petitioner to UPE were not contemporaneously memorialized in promissory notes. During 1987, 1988, and 1989, UPE obtained several salvage jobs, sold some of its inventory, and brokered a deal that netted $450,000 in commission fees; however, UPE reported losses for those tax years. Stewart, however, desired to expand UPE’s operation beyond salvage and used equipment sales, and in 1990, UPE entered into a short-term industrial construction venture with Formosa Plastics Corp. U.S.A. (Formosa). After a feasibility study, it was determined that the Formosa venture could be profitable because UPE’s labor force already had the necessary skills for performance. UPE bid on and was awarded six contracts (the Formosa contracts) valued at $8,430,963. UPE did not seek legal counsel at the time the contracts were executed, and the terms of the contracts were unfavorable to UPE and favorable to Formosa. UPE expected a profit of at least 10 percent from the Formosa contracts. Under the Formosa contracts, UPE was required to supply the labor, tools, and equipment necessary for the installation of piping and turbines. Formosa was to supply the pipe and the turbines and make progress payments at various stages of completion. UPE planned to use the progress payments to pay forPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011