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December 26, 1989, letter from Mr. Schoneman to Mr. Lopez. In
early January 1990, Mr. Schweitzer informed Mr. Schoneman that he
did not think petitioner Dawes had $103,000. They discussed how
to get around that problem. Mr. Schweitzer suggested that
Ameritech could pay the money. The idea of a tax-free
reorganization came up during their conversation.
Mr. Schweitzer and Mr. Schoneman agreed upon a tax-free
reorganization to distribute the 303 products business assets to
a new corporation to be owned by petitioner Praegitzer. On
January 10, 1990, Mr. Schoneman sent Mr. Schweitzer a letter
stating that a tax-free reorganization, whereby petitioner Dawes
and Kerry Dawes would operate the propeller business and
petitioner Praegitzer the 303 products business, was acceptable
to petitioner Praegitzer.
Ultimately, the parties signed two agreements on January 30,
1990: (1) The Marital Settlement Agreement (MSA), executed by
petitioner Dawes and petitioner Praegitzer, and (2) the Agreement
and Plan of Corporate Separation and Reorganization (the
reorganization agreement). The MSA provided that “This Agreement
controls over the Judgments dated June 9, 1989 and the Memorandum
of Agreement dated December 11, 1989.”5 Under the MSA,
petitioner Dawes and petitioner Praegitzer divided all of their
community property and jointly owned property and liabilities,
5 The parties stipulated that the reference to Dec. 11,
1989, was a typographical error that was intended to refer to the
Dec. 12, 1989, agreement.
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