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contemplated that the parties would enter into a lease on the
Stanford plant for 8 years for “$5,000 (or $5,500 per month)”. A
commercial lease for this property was prepared but never
executed. According to this unexecuted document, for a period of
8 years commencing March 1988, ERG was to pay NPI $5,000 per
month for the use of the Stanford plant.
For 1988 and 1989, ERG paid NPI $5,159 per month for the use
of the Stanford plant. This monthly amount paid remained
unchanged until August 15, 1990, when ERG paid NPI $26,159 that
month. For the last 4 months of 1990 the monthly amounts paid
were $8,159, $8,159, $14,159, and $8,159, respectively. In 1993
and 1994, ERG paid NPI $9,380 and $10,787 per month,
respectively.
Respondent determined that part of the money, $40,067,
$46,560, and $63,444, ERG paid to NPI as rent for the Stanford
plant in 1990, 1993, and 1994, respectively, constituted
constructive dividends to the Bensons.56 Thus, it appears that
respondent is arguing that the amount of rent paid in excess of
$5,500 per month constitutes constructive dividends.
The maximum monthly lease amount listed in the unbundling
agreement apparently reflected the product of an arm’s-length
56See supra p. 5, table, note 2.
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