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F. 2000 RFC Equipment
On April 30, 2000, CRG purchased computer equipment (2000
RFC equipment) from RFC for $9,181,432 and leased the 2000 RFC
equipment back to RFC. Pursuant to promissory notes dated
April 30, 2000, CRG promised to pay RFC $663,400 and $8,080,320
as to the purchase.
Also on April 30, 2000, LCL purchased the 2000 RFC computer
equipment (subject to the lease) from CRG for $9,181,432.
Pursuant to promissory notes dated April 30, 2000, LCL promised
to pay CRG $663,400 and $8,029,222. No individual member of LCL
signed or directly guaranteed the notes, the latter of which
stated it was recourse to the extent of $3.225 million and that
payments of principal and interest 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 RFC equipment the following
amounts of lease income, interest expense, depreciation, “G&A”
expense and interest income, and loss:
2000 2001
Lease Income -0- $1,545,155
Interest expense ($205,190) (508,995)
Depreciation (1,836,287) (2,938,058)
Net G&A expense and
interest income -0- 9,848
Loss 2,041,477 1,892,050
The portions of these losses allocated to HBW’s 99-percent
ownership interest were $2,021,062 and $1,873,130 respectively.
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