-10- documents that petitioners had earlier presented. Petitioners' counsel related the following information to respondent's counsel during the meeting. 1. Petitioner is a chemical engineer whose specialty is paint. In 1990 he was employed by Elite, a company that developed, produced, and sold special application paints for bridges, ironwork, and railroad rolling stock. Until 1987, Elite was a wholly owned subsidiary of H. Enterprises. 2. Prior to 1987, petitioner had loaned funds or had not received salary so that Elite essentially owed him $72,000. In 1987, Elite issued petitioner 49 percent of the outstanding stock. In return, petitioner contributed $72,000 to Elite and signed an interest-bearing note for $228,000. Petitioner expected to pay the note with future Elite dividends. However, Elite did not pay dividends because its excess cash was "siphoned off" by Mr. Hargis. As a result of the transfer of stock in 1987, Elite was no longer able to file a consolidated return and began to file its own income tax returns. 3. Through two separate agreements entered into in April 1990, Elite canceled the $228,000 note, and petitioner acquired the remaining outstanding shares of Elite stock. Central to the change in ownership, but not part of the agreements, was a refinancing arrangement whereby the financial backer of the corporation was replaced.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011