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Cumulative Interest
Sister Corp. Year Advances Reported Percent
First World 1984 $10,260 $1,160 11.3
First World 1985 111,129 7,194 6.5
First World 1986 271,094 13,965 5.2
First World 1987 496,153 31,288 6.3
First World 1988 654,077 51,349 7.8
First World 1989 808,333 65,206 8.1
Airport Ser. 1987 48,866 2,416 4.9
Airport Ser. 1988 65,650 3,084 4.7
Throughout the 8-year period the amount of outstanding
advances was increasing, the amount of repayment was decreasing,
and no amount of interest was paid by the sister corporations.
Instead of being paid, any interest accrued by petitioner was
merely rolled over annually into a note receivable. As the
sister corporations’ revenues decreased, advances from petitioner
generally increased, reflecting a lack of concern about the
possibility of repayment. Petitioner continued to advance funds
to its three sister corporations even though conditions worsened,
and the likelihood of repayment diminished. The three sister
corporations did not seek financing from outside sources.
The three sister corporations made a total of $414,220 in
repayments, which petitioner applied to the outstanding open
“account receivable”. The repayment amounts were sporadic, and
they were not uniform in amount. For example, during 1986
petitioner advanced $151,000 to First World Corp. and $5,000 was
repaid. In the next year (1987), $184,600 was advanced, and
nothing was repaid. During the following year (1988) $163,025
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