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On March 31, 1987, petitioner acquired an operating marina
business located on the Middle River in Essex, Maryland, a suburb
of Baltimore. The purchase date and conflicting evidence as to
the form of the sale are the only details of this transaction
that have been placed in the record.1 At the time of the
purchase, or shortly thereafter, petitioner incorporated Boating
Center of Baltimore, Inc. (BCBI or the corporation). Petitioner
paid $25,000 for 5,000 shares of common stock of BCBI, which
represented all of the corporation's issued and outstanding
stock. On April 3, 1987, petitioner transferred all of the
assets of the marina to BCBI. From the date of its incorporation
through December 20, 1991, petitioner was president and sole
shareholder of BCBI. Petitioner entered into an agreement to
sell his interest in BCBI, as discussed in more detail later in
this opinion, on December 20, 1991.
On March 31 and October 15, 1987, petitioner advanced
$275,000 and $45,000, respectively, to BCBI. Each transaction is
evidenced by a promissory note (the notes) and a resolution
adopted by BCBI's board of directors authorizing the corporation
to accept the terms and conditions set forth in the relevant
promissory note. The notes were signed by petitioner as
1The parties stipulated that petitioner "purchased the
assets of an existing marina". Petitioner's direct testimony
suggests that he purchased the stock of the corporation that
owned and operated the marina. We proceed as though the
stipulation accurately describes the transaction.
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