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E. 2000 Computer Equipment
On April 30, 2000, CRG purchased computer equipment (2000
computer equipment) from RFC for $765,326. Pursuant to
promissory notes dated April 30, 2000, CRG agreed to pay RFC
$56,850 and $672,101. On the same day, CRG leased the 2000
computer equipment back to RFC.
Also on April 30, 2000, LCL purchased the 2000 computer
equipment (subject to the lease) from CRG for $765,326, and LCL
executed promissory notes to CRG in the amounts of $56,850 and
$667,766. No individual member of LCL signed or directly
guaranteed the notes, the latter of which stated it was recourse
to the extent of $340,000 and that payments of principal would be
applied first to the recourse portion. For each of its taxable
years ended in 2000 and 2001, LCL reported as to the 2000
computer equipment the following amounts of lease income,
interest expense, depreciation, “G&A” expense and interest
income, and loss:
2000 2001
Lease income -0- $100,341
Interest expense ($17,065) (48,816)
Depreciation (153,065) (244,904)
Net G&A expense
and interest income -0- 639
Loss 170,130 192,740
The portions of these losses allocated to HBW’s 99-percent
ownership interest were $168,429 and $190,813, respectively.
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