Estate of Lea K. Hillgren, Deceased, Mark Hillgren, Executor - Page 12

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          other would lend money.  In 1994, Hillgren was paying decedent              
          10-1/2 percent interest whereas decedent was paying Hillgren                
          8-1/2 percent.  Separate loan accounts were maintained for loans            
          between decedent (doing business as LKHP, the amended trust, or             
          Sea Shell) and Hillgren (doing business as Seaward).  One account           
          tracked the amounts borrowed by decedent from Hillgren, and                 
          another account tracked the amounts borrowed by Hillgren from               
          decedent.  The balances in the two accounts were reported                   
          separately in the general ledger and financial statements of LKHP           
          and the amended trust.  Sea Shell’s balance sheets for 1987                 
          through 1994 did not reflect accrued interest on the loans                  
          between decedent and Hillgren, nor was interest included in the             
          balances of these loans when computing the net asset value of               
          LKHP as reported on decedent’s estate tax return.  The accrued              
          interest on the loans from Seaward to Sea Shell was not paid                
          until December 1997, and the accrued interest on the loans from             
          Sea Shell to Seaward was not paid until 1998.                               
               In December 1993, decedent sold a house, and the proceeds              
          were disbursed to Seaward as the $20,000 remaining principal on a           
          loan and $265,000 as a new loan to Seaward.  At the time that the           
          BLA was signed, if the balances in the accounts were netted,                
          Seaward owed more money to Sea Shell than Sea Shell owed to                 

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