John A. Malone and Brenda K. Malone - Page 4

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          B.   Seattle Pump Company, Inc.                                             
               1.   Sale to Petitioners                                               
               Petitioner’s brother, Thomas Malone, is an attorney who                
          represented Helene Voier (Voier), the owner of Seattle Pump.  She           
          wanted to sell her Seattle Pump stock.  Petitioner studied                  
          Seattle Pump’s books and records.  He concluded that it had been            
          profitable and that he could earn wages of $70,000 per year from            
          it.                                                                         
               On December 19, 1986, petitioners bought all of the Seattle            
          Pump stock from Voier.  Petitioners agreed to pay $362,000 to               
          Voier as follows:  (a) $50,000 by January 1, 1987; (b) $50,000 by           
          January 2, 1987; and (c) $262,000 by January 1, 1989, with 9                
          percent interest.  Seattle Pump's records of accounts receivable            
          and payable were not very accurate.  Petitioners agreed to                  
          increase the purchase price of Voier’s stock later based on the             
          accounts receivable and payable.                                            
               Voier agreed to finance the sale if petitioners gave                   
          security other than Seattle Pump stock.  On December 19, 1986,              
          petitioners signed a $312,000 promissory note payable to Voier.             
          The note required petitioners to pay $50,000 by January 2, 1987,            
          and to make monthly payments of $2,500.  The balance was payable            
          by January 1, 1989, with interest at 9 percent.  On December 19,            
          1986, petitioners borrowed $50,000 from Seattle Pump’s cash                 
          reserves to make a downpayment to Voier.                                    





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