- 4 - petitioner a total of 5,200 shares.1 Petitioner’s original cost basis in the shares was $116,504. Petitioner never physically possessed the shares, which were held in “street” name in petitioner’s security account with Drexel. Petitioner’s shares were not registered pursuant to the Securities Act of 1933, and there was no market on which they could be traded. In accordance with the “buy-back provision” contained in Drexel’s Restated Certificate of Incorporation (certificate), the shares were nontransferable and generally could only be sold to Drexel upon an employee’s termination from Drexel. Pursuant to the certificate, the price Drexel would pay for the shares was set at their aggregate net book value. Pursuant to the recommendation of a consultant that its retail securities operation be sold, Drexel announced on or about April 18, 1989, that it was disposing of the operation, of which petitioner was an employee, to Smith Barney Harris Upham, Inc., and the sale occurred on May 19, 1989. As a consequence of the sale, petitioner’s employment with Drexel was terminated, which precipitated the mandatory redemption of the shares pursuant to the terms of the certificate. Drexel notified petitioner by letter dated August 11, 1989, that pursuant to the “buy-back 1 We accordingly do not accept the suggestion in the parties' stipulation that petitioner owned only 1,300 shares of Drexel stock throughout the period that he held the shares. Cal-Maine Foods, Inc. v. Commissioner, 93 T.C. 181, 185 (1989).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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