- 50 - explained the “plan”: “And not having exact numbers to work with, I suggested that we allocate the numbers based upon the income of the corporation. When we get down to the end, we’ll take whatever difference there is and put it into the middle years.” The theory of allocating ERG payments for tax years prior to payment was further refined in Jill Toibin’s letter to the California Franchise Tax Board: The corporation [NPI] receives royalties and performs engineering services for a related entity * * * [ERG]. The corporation is a cash basis taxpayer. However, the corporation was required to report as current income any amounts constructively received, even though such amounts were not actually paid in the current year. * * * During trial, Bradac was asked and answered as follows: Q: Okay. Now was there a discussion at some point between you and Admiral Benson of a desire to flow profits from ERG to NPI? A: I mean I don’t think of it in those terms, but yes, I guess there would be discussion which entailed that. * * * * * * * Q: Did you specifically recall, do you recall having conversations with Admiral Benson about trying to keep the profits of ERG down? A: Yes. * * * * * * * Q: Did you have an understanding from Admiral Benson that more of the profits of ERG could be passed, or flowed to New Process through increasing deductions on ERG’s returns?Page: Previous 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 Next
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