13
declared by S&B on April 29, 1988, should have been revealed in
one or more of the SPA sections 4.8, 4.18, or 4.20. Yet no
dividend is mentioned in the corresponding schedules in the SPA.
It was not until November 1988 that S&B recorded on its books a
dividend payable in the amount of $1,245,880.36 and charged the
same amount against preacquisition retained earnings and profits
of S&B.
We conclude that the minutes of S&B's board meeting held on
November 14, 1988, did not reflect accurately events, if any,
that transpired on April 29, 1988. Fender testified as follows:
Q. Was there a meeting of the board of April 29, 1988,
wherein the board of directors of the subsidiary
declared a dividend from the subsidiary to the parent?
A. I don't specifically recall it, but it was our
practice to have a meeting every quarter and we
obviously did, based on the ratification of the minutes
of that meeting in November. * * *
Petitioner's only other witness at trial, Richard Anderson, had
no personal knowledge of any meeting or informal discussion of
the S&B board on April 29, 1988. The minutes of the special
meeting of S&B's board of directors held on April 26, 1988,
indicate that the board discussed the status of the management
group's proposal to purchase the S&B stock, but there is no
mention of S&B's declaring a dividend.
Petitioner argues that, pursuant to Litton Indus., Inc. v.
Commissioner, 89 T.C. 1086 (1987), the amount at issue in this
case constitutes a dividend to Thor and not part of the proceeds
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