Karns Prime & Fancy Food, Ltd. - Page 12

                                       - 12 -                                         
          gave petitioner a $1.5 million check drawn on Rich Foods’ check-            
          ing account.                                                                
               During the year at issue in August 1999, SUPERVALU, Inc.               
          (SUPERVALU), acquired Rich Foods.  SUPERVALU recorded the $1.5              
          million advanced to petitioner in SUPERVALU’s fixed asset ledger            
          as a supply rebate that was to be amortized over six years in               
          monthly installments of $19,230.77.  Petitioner recorded the                
          April 15, 1999 note in its books and records as a long-term note            
               Petitioner expended $750,000 of the $1.5 million at issue on           
          capital improvements and temporarily invested the balance in                
          certificates of deposit (CDs).  Petitioner pledged the CDs as               
          collateral for a $960,000 loan from PNC Bank.  Petitioner used              
          the $960,000 in PNC Bank loan proceeds for capital improvements.            
               During the latter part of the year at issue, Mr. Karns                 
          concluded that it would be desirable to relocate one of peti-               
          tioner’s stores.  As a result, he entered into negotiations to              
          lease a new site for that store.  The prospective lessor of that            
          site refused to lease it to petitioner without a guaranty of                
          petitioner’s lease obligations.                                             
               At all relevant times, SUPERVALU agreed to act from time to            
          time as a guarantor of a customer’s lease obligations where                 
          SUPERVALU concluded that to do so would serve SUPERVALU’s busi-             
          ness interests.  Around January 25, 2000, SUPERVALU guaranteed              

Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011