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Under the MMS/Huntington Loan line of credit, MMS was
allowed advances of up to $250,000 per modular or mobile
diagnostic unit under contract. Interest at a rate of one-half
point above Huntington's prime rate was payable monthly on the
outstanding principal advanced. MMS executed a promissory note
and granted Huntington a first security interest in MMS's
accounts, inventory, equipment, fixtures, and receivables as
security for the MMS/Huntington Loan. In addition, petitioner
executed an unlimited guaranty for MMS's indebtedness, secured by
a second mortgage on his personal residence, and each member of
the Rapp Group executed limited guaranties which in the aggregate
were equal to the entire $1 million authorized indebtedness. The
Rapp Group guaranties were collateralized with shares of Danek
Group, Inc. (Danek), a publicly traded stock with an aggregate
value that exceeded $1,000,000 when the MMS/Huntington Loan was
executed.
MMS's annual operating losses accumulated, and petitioner
had insufficient basis in the corporation to deduct them
currently. As of December 31, 1991, petitioner had suspended net
operating loss deductions from MMS as follows:
Suspended net operating loss from 1990 $540,506
Suspended net operating loss from 1991 87,322
Total 627,828
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Last modified: May 25, 2011