- 11 - associates. His testimony, however, was contradictory, inconsistent, and unconvincing. For example, Mr. Rowe testified that either “a handshake” or “a signature” was sufficient to bind him to an agreement. Yet, he readily failed to honor his “agreements” not to demand repayment. In addition, despite the FTB loan restrictions on repayments to stockholders, when the Rowes needed cash for personal needs, petitioner paid them on demand. In essence, the Rowes simply wanted to receive a 10- percent return on, and ready access to, the transferred funds. As a result, petitioner, along with the Rowes, manipulated facts to attempt to make the transfers appear as debt and avoid certain legal consequences. III. The Transactions Were Not Arm’s Length The transfers between petitioner and the Rowes were not arm’s-length transactions. First, because the Rowes wanted a 10- percent return, the interest rate paid by petitioner was above the market and prime rates for almost 12 years. Second, the Rowes began transferring funds to petitioner in 1987 but did not begin reducing the “handshake deals” to a writing until December 31, 1993, and the outstanding balance was not fully documented until November 21, 1995. In 1997, the Rowes made additional transfers, but they were not evidenced by a writing until 1998. Third, petitioner and the Rowes executed waivers that were violated, and, at their convenience, considered nonbinding.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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