Flint Industries, Inc. and Subsidiaries - Page 46




                                       - 46 -                                         
               1.  Did G�nther Have Value During FYE 1991?                            
               As shown in the consolidated report column of G�nther’s                
          balance sheet as of May 31, 1991, G�nther had a positive net                
          worth of $1,405,422.  Respondent does not dispute that G�nther              
          had value during FYE May 31, 1992; it argues only that petitioner           
          has failed to prove G�nther was worthless on May 31, 1992.                  
               2.  Did G�nther Lack Liquidation Value As of May 31,                   
          1992?                                                                       
               A corporation lacks liquidation value when its liabilities             
          exceed the value of its assets.  Steadman v. Commissioner, supra            
          at 376-377.  Following an investigation, petitioner concluded               
          that G�nther’s liabilities substantially exceeded the aggregate             
          fair market value of G�nther’s assets and that petitioner would             
          receive nothing upon G�nther’s liquidation.30  In fact,                     
          petitioner has demonstrated to our satisfaction that its                    
          conclusion was accurate and that its management searched                    
          diligently for any of G�nther’s assets that had a fair market               
          value in excess of book value which could be liquidated to pay              
          down the guaranteed bank loans and mitigate petitioner’s losses             
          from its investment in G�nther.                                             




               30G�nther’s consolidated balance sheet as of May 31, 1992,             
          shows a deficit in shareholder’s equity of $17,010,232.  Our                
          conclusion that the intercompany advances were contributions to             
          capital and not debt requires an adjustment in that figure, but,            
          even after adjustment, G�nther still had a substantial net                  
          deficit as of May 31, 1992.                                                 




Page:  Previous  36  37  38  39  40  41  42  43  44  45  46  47  48  49  50  51  52  53  54  55  Next

Last modified: May 25, 2011