Eric B. Benson, et al. - Page 50

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          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?                                                         







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