Stephen D. Pahl and Louise A. Pahl - Page 12

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          (the petitioner K-1) attached to the Niesar Pahl 1990 return,               
          petitioner is identified as a shareholder of the corporation.               
          Petitioner is likewise identified as a shareholder on a Schedule            
          K-1 attached to Niesar Pahl’s 1989 income tax return.                       
          Petitioner’s compensation package resembled that of a                       
          shareholder-employee, not a nonshareholder-employee.  Niesar Pahl           
          was engaged in a service business, the practice of law, and, as             
          law firms go, it was not particularly large.  Petitioner’s                  
          positions, as president, managing partner, and chief financial              
          officer, strike us as typical of an owner (partner) or principal,           
          rather than as a mere employee.                                             
               Indeed, the minutes of the August 3 meeting of the board of            
          Niesar Pahl state that the corporation “shall issue and sell to             
          * * * [petitioner] one thousand (1,000) shares of common stock,             
          such action to take effect on August 9, 1989".  (Emphasis added.)           
          There is no explicit date for satisfaction of the price term:               
               the price to be paid by * * * [petitioner] for such                    
               shares shall be determined by an audit of the                          
               corporation’s balance sheet as at July 31, 1989; and                   
               * * * [petitioner] shall pay in cash, the amount equal                 
               to * * * [one-quarter] of the net worth of the                         
               corporation as determined by reference to such audited                 
               balance sheet as at July 31, 1989, as and for the total                
               purchase price of said purchasers’ [sic] 1000 shares of                
               common stock.                                                          



          1(...continued)                                                             
          since Niesar testified that he actually saw Pahl sign the                   
          guarantee.  We disbelieve petitioner’s testimony to the contrary.           
          The requirements of Fed. R. Evid. 1003 are met, and Exhibit O was           
          properly received into evidence.                                            



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