110 T.C. No. 18
UNITED STATES TAX COURT
MARTIN ICE CREAM COMPANY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1477-93. Filed March 17, 1998.
A and his son M were shareholders of MIC, an S
corporation that distributed ice cream products to
supermarket chains, independent grocery stores, and
food service accounts. MIC's supermarket business was
largely attributable to the close personal relation-
ships that A had developed and maintained for decades,
beginning before the creation of MIC in 1971, with the
owners and managers of the supermarket chains. Since
1974, MIC had distributed the ice cream products of HD,
pursuant to an oral agreement entered into between A
and the founder of HD. In 1987 and 1988, following the
acquisition of HD by a public company, HD initiated
negotiations with MIC to acquire MIC's rights to
distribute HD ice cream products to MIC's customers.
After some but not all terms of the acquisition had
been negotiated in the 1988 negotiations, A and M
caused SIC, a wholly owned subsidiary of MIC, to be
created, and HD was notified that SIC would be the
seller of the assets that HD wished to acquire. MIC
then transferred to SIC all of MIC's rights to
distribute HD ice cream products to the supermarket
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