- 31 -
McKernan, reduced his percentage membership interest in the LLC
from 88 to 68 percent and increased Ms. Moore’s percentage
membership interest from 2 to 12 percent. Petitioners argue,
however, that those transfers occurred in July 2000 upon the
execution of the assignment and assumption agreement.
Petitioners also argue that the 1998-2000 distributions from
the LLC to its members in amounts either precisely or closely
reflecting a 68-20-12-percent profit split among Dr. Joffe, Dr.
McKernan, and Ms. Moore, respectively (referred to by
petitioners’ counsel, on brief, as “disproportionate
distributions”), did not reflect a shift in the membership
interests among those three individuals before July 2000, but,
instead, reflected an informal agreement among them that Dr.
McKernan and Ms. Moore should be compensated by those
distributions for the use of LLC profits and the pledge of LLC
assets to discharge Dr. Joffe’s debt to the creditors of his
failed surgery center in Cincinnati, Ohio. In effect,
petitioners argue that, to the extent the 1998-2000 distributions
to Ms. Moore and Dr. McKernan exceeded 2 percent and 10 percent,
respectively, of the LLC’s current and accumulated profits, they
represented a return of capital.
In support of their position, petitioners rely primarily
upon: (1) the Moore letter, which speaks of distribution
percentages and not shares of income, (2) the Joffe memorandum,
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Next
Last modified: November 10, 2007