-9- Elite is shown as a liability; and (2) petitioner's half-interest in petitioners' residence is listed as an asset, while the full amount of the residential mortgage is shown as a liability. Respondent's counsel contended that an accurate financial statement would show that petitioner was in fact solvent in April 1990 because Elite owned valuable equipment, patents, and real property.5 Respondent's counsel was uncertain whether section 108(e)(5) applied because it was not clear from whom petitioner acquired his Elite stock. Petitioners never provided respondent's counsel with Elite's stock record book. Respondent's counsel believed that section 108(e)(5) would apply only if Elite had sold the stock to petitioner. In addition, section 108(e)(5) requires petitioner to have been solvent in April 1990. Finally, respondent's counsel believed that petitioner acquired all of the Elite stock through a series of agreements in which valuable property and rights to property were transferred to Mr. Hargis and entities that he controlled in exchange for his Elite stock. Petitioners' claim that the Elite stock was worthless was belied by the hard-bargained series of deals. On February 16, 1995, counsel for petitioners and respondent met to discuss the case. Petitioners' counsel for the first time provided respondent's counsel with factual background to the 5 An Oct. 3, 1989, letter states that Elite was worth approximately $1,250,000.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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