- 4 - agreement, petitioner redeemed UBM's 51-percent stock interest for a purchase price of $6,250,050, issued a note to UBM's parent corporation for that amount (UBM note), and retired the redeemed shares. As a result of that redemption, Mr. Neiman, Mr. Reed's estate and/or its beneficiaries,3 and Snider Lumber (referred to collectively as the shareholders) each owned one-third of peti- tioner, and they were personally liable on the UBM note. As of February 28, 1986, petitioner's liabilities exceeded it assets and its net worth was negative $1,514,000. According to its audited financial statement for its fiscal year ended February 28, 1986, that was prepared by Touche Ross & Co., petitioner's net income after taxes (but before utilization of net operating loss carryforwards/carrybacks) for that year was negative $3,599,000. During that fiscal year, petitioner's working capital decreased by $3,426,000 from $7,008,000 to $3,582,000 and its cash balance decreased by $1,410,000 from $2,815,000 to $1,405,000. Petitioner's long-term debt increased from $8,723,000 as of the end of its fiscal year ended February 28, 1984, to $13,092,000 as of the end of its fiscal year ended February 28, 1986. As of February 28, 1986, employee morale was 3 It is unclear from the record whether Mr. Reed's estate and/or its beneficiaries owned Mr. Reed's stock from the period beginn- ing with Mr. Reed's death in 1981 until that stock was purchased (as discussed below) by Stanislaus Funding Corp. in December 1986. For convenience, we shall refer hereinafter to the owner of Mr. Reed's stock during that period as Mr. Reed's estate.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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