Document N2X863GxNyYjRYxxMbbLYV13w

C. K. Brevln ClCVOln..d 14 EJZZQH LEAD April Ik, i960 Attache: ic a aarsQrtwflda suxmarizlne the bistoxietl sequenot f event* and aecountine cntrie? for tlus Easton Lead dispoetion. Xt VM eoapUed fm various eoureas and represents the most accurate record X Ear* been o M* to develop* parte A, E> and C of this mo d ere prepared with the Emma Aent in Bind and soold be shown to him to explain tha etery* Itot p is fatr eer internal nse and Is intended to for:. the basis for our ova discussions* -r Kr. Kcr^c vas aware that tha transaction teas not foliar narpleteit In 1958 and X propose to raise this point with the osv agent at a convenient ament. I should cppredLate t o u t review of the nuggetted procedures and of the historical narrative in case you vieh to treat the Matter differently or otherwise isprove the stor/. .'i:c vc h-.vc recorded the new dlspostion ve should find that vs siU alaost exactly recover our present net book value of about $1*3,000 (depending on depredation). 0. E. WM3 tax Department 0*^:^: lul. Att&i. GLD37915 IM, L^yt^y (j> , (*>et^ %s~pL^4d Ly I ^ GvMyut>sAC4^ Orvbutjsi 9~ G-^roA^J uurtUjtJ* G-^Cp I* f<db**sy*- *" 'j/`{A^tite f- <y**J - U, fVof. C. K. Brovin Cleveland 14, Ohio April 33, i960 EUSTOU IAT> TRAHSACTXOIf A. HTSTORICAL gBOPEHCS <F IVBflS Under a sales agnaMot, dated March 3, 1958, Qlldflen agreed to sell the entire assets of Scranton Uvtslon So. 126 to Duaoct Airplane end llurlne Xnetraesnta, Joe* for the consideration of $75,000 plus the value of inventory as determined at data of transfer (April 10, 1958)* Olidden received a check as down payment ftr $10,000 which ess credited to Msc. Profit and Less and w subsequently Included as a adscellnnaous locoao ltm on our 1956 tax return. She balance was dee and payable ee or before April 10, 1956. The escrow lastractions, dated Much 31, 1956, provided that if the full purchase price vss not paid before April 10, 1958, the deed and bill of eale (for Inventory} would be reused by the escrow agent to Oliddan, elnoo time waa of the eeaenoe of the contract. By acreeaent on April 10 and April 16, 1956, the escrow waa extended to April 18, at which tloc it expired. On my 7, 1956, Cllddon formally notified Pumont that it waa in braach of Its agraaaent oc of /pill 19 and had forfaited Its deposit. On June 9, 1953, Oliddan and Duaont entered into an A--udstory Agresesnt for the eale cf the fixed assets at the following eoosldaxwtloa} deposit $5,000 (paid by check) end Wo promissory notes for $75,000 (covering the fixed aseets) and $26,293 (covering iaveetory). The note? vere to be secured by a mortgage on tha real estate and by a mortgage bond. Shortly thereafter Duaont entered into possession of the plant end presumably eonenoed operations. On June 13, 1956, the Union Oonaerce Bank advised CUddan that the $5,000 check was dishonored, at which tiae Glldden deleted Wise. Acoounts Beoelvable and credited Mac. Profit and Loss for this aaount, which subsequently appeared as a miscellaneous Income -ten on our 1953 tax return. Durinc this time, and in view of the breach of contract by Xusont in presenting a worth* less check, Glldden retained tha title dead* Consequently, the title deed waa never recorded for transfer, the title did not peas and tha assets remained in the ownership cf Gliddci!. GLD37917 N 2571.02 EtPTCGT LS-'D 5RAHSACTKW 2 - April 13, 1960 At tt:c tirrs of our 1953 fiscal dosing tie legal nature of tills transaction was under consideration by our legal departxaont, end It vet* not apparent that It Should to treated for accounting or tax puiposeo on any basis other theta the a--nflod agrs--ant cf June 9th. Vo, therefore, recorded the disposition of the find mat! under JW (August 31> 1950) and above! a net gain cf $30,650 00 Bebodule D Of oar tax return. On December 29, 1953* notice vss Issued to creditors to die proof of date in bankruptcy of Duaont. On Pettier/ 12, 1959/ Clidden filed clain In bankruptcy ter $H0,lh6.& as deaaoes So t broach of contract of Jtme 9, 1953, oosprleine; dishonored check. $5,000, promissory notett of $75,000 and $26,293, pte* hdannt of $3,85S*& aLfleeUaeMoe Item* In the intexia, Dnaocxt ceased operations end vsert out of possess Iq l i end don August 3959/ Clidion, to protect its property, re-entered potseeeioo through * onttder end incurred various nainteoanc* expenses and zeal --tabs taxes* On December 17, 1999, Oildden received $3,991*52 fx Zkaoot reprsoentlng certain operating proceeds dne to Oliddeu and in no way connected vlth the sale or vith the bankruptcy proceeding8* Shis aaount la currently carried In a Cash Clerqance account and will be credited to ICLsc. profit end loss daring F.X.E* 8-31-60. On Dectabor 19, 1959 the real property and --chinery and egulpaeat vers sold at public 1 auction to U-.J. 3tarlaani and others* Title to the personalty passed oo Docoaiber 15, to the realty ou February 19, i960. As of the lAfcer date, the transfer vae coopleted and peyaent was reoelved In cash. Accounting ecxtrlas to record the property disposition III! vtU be node during P.f.E* G-3I-6O. Cllddea la currently eaending Its elute In bankruptcy to reduce the claiaed daoaeos for broach of contract by the aooont cf the proceeds ft-- the Deeentoor 15 auctioa sale* a. /jrizsig c f zs e ir ah s ac epo s (1) Zt is clear that there va* no completed sale and no tzanefor of title to the property as the result of either the contract of Nandi 3, 3953 or the contract of June 9, 1993* (2) Our tax return for F.Y.E. 8-31-58 (particularly fldhsdtale D) did not represent the true state of affairs as subsequently revealed. (3) 13* property recoined In CQLiddea's ownership si ell Uses until the transfer dates of December 19, 1959 and February 15, I960* On this point should be noted; QHAden's c.ttcz&U) to safeguard the property after Dunoot vent cut of possession, CUddon's .. payraonta of real property tax and the recognition by tee bankruptcy Court that ihis . property vas in no way pert of the assets of Dumont available Sor distribution and vo3 absolutely in the ownership of Qli&len. GO Tx? handling or the cesh payaent of $10,000 and the dishonored cheek of $5,000 es yj.ee. profit and zoos lies* lnclofisd in 195$ inoaae, further Illustrates that no c-lc tool: place. GLD37918 EU3T0S X2AD TBA3BACTI0B 3 $9ta 13, i960 c. Attxxrrrnc iw r ies c t c o r c b) Cette C.A. EUvIT 5/31/5S <p 54409 Cosh daaranoa Scranton #28 (MUe. P. & I) Branch of Contract Ptaaper 6/ 9/58 61502 Acoouata BiedvlUii Scranton #28 Bk . of const Apr ltwntcay A mgpltm 6/ 9/58 61743 Beotlw^blt OoflBlAtd opoatmetlaa Btc* of aote for Trap** pit, A agpt* 6/9/58 62585 Account# AtotlnUa Sciutdo #26 (XUc, P. A lw) Breach of Contract JMgna 8/31/50 J.V.8 Doprelation Pafttm Dnfinlsbod Construction Prop*, Pit. A Bqpt. MLtc. P. AL. - Cup. Otln Tt xacoKL Mia of ftutem Lsad Stir* _P*W credit *10,000*00 # 10,000.00 86,293.00 86^93X0 jfpoom 75,000.00 5JXOJOO 5,000.00 4*8,435.00 75,000.00 462,743.00 30,690.00 7/21/59 P.I.E. Acoouata Baotlrriblt 7018 Cash Claaxuaoe B.P. fax payuaot gaurtarty 1,278*50 8/31/59 83523 Account* Stoalvahla Accounta Payable Caretaker aanriaaa for Anffaft 104*88 Mice. Accounts BeodwCbla * Iftaoot Cawilt Batanaa aft 6*31-59 1^73.50 304*68 1107,676.38 Tax Payaenta tod Bslntonanea Eoeaaaa duafltgg 8-H-60t. 9/24/59 9/24/59 10/0/59 U/5/59 1/7/30 91561 91316 lOOolO 101235 101236 102302 103375 110250 111147 c*:l BB X Total Mae. Account# Bsoolvaibla - in--ait 3/31/60 1,278.50 89.58 100.00 90.00 9*.x 343.84 33.2? 115.34 30.00 (343.84) 8UO>321.44 CiCLinlv GL037919 EUSTOS LEAD TRABSACTIOT 4- April 13, i960 D. BECXEKEHPSD BAKDLCTO - dishonored check for $5,000. These now represent breach of contract damages and ore properly recorded, The ^,000 aaount sill he adjusted bgr our Aeoounte Receivable credit when charging off the bed debt. (2) Journal Voucher |8 of August 31, 1958 end 0.A. 61743 of Atae 9, 1958 should be reversed by the following entries) Pdfadt Credit Klee. P & L Prop ., Pit. A Eqpt ttisc. Accounts Receivable - Dnaont Depredation Reserve (3) Additional Depredation should be set 19 for ons half yeer &n 1958, All of 1959, and one-half year In i960, (4) voucher should be prepared to xaoosd the ultimate sal* In 8-31-60. (5) nice, profit aal Dose tor y.T*X. 8-31-60 should be credited with $3,991.32 fur the niscclleneouB receipts now being held in Cash Claarenoe. (6) ?>e taxes and miscellaneous expenses for the current fteeel year listed Above end totalling $2,645.06 should be reversed out of Accounts Beodveble end changed directly to the expense accounts iswlvod. (7) The sane procedure as In (6) Should be adopted tot the tax and aaaaenee ltaee of $1,273.50 and $104.83, totalling $1,383.38, reooxdad 7/23/59 end 8/31/59* (8) 7uc rcsullnc MUc. Aeoounte BeoelvAble - Doaont debit bAXaxwe of $31,293 should be charged to Bad Debts (but querys shat division as Bsadpiarters could cot absorb this amount!). (9) Any subsequent proceeds of the bankruptcy proceedings should be taken as Sad Debt GLD37920 GLD37921 N 2571.03