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addition, Mr. Sokol oversaw petitioner's inventory operations at
six separate warehouse locations. Mr. Sokol worked full time for
petitioner, as well as many weekends and late nights.
On August 9, 1991, petitioner redeemed all of Mr. Sokol's
stock, leaving Mr. Bennett as the sole shareholder. There was no
connection between the redemption of Mr. Sokol's stock and the
compensation previously paid to Mr. Bennett and Mr. Sokol during
the years in issue. The purpose of the redemption was to allow
Mr. Sokol to retire. Nevertheless, after the redemption, he
remained as a part-time employee of petitioner working
significantly reduced hours, taking more vacations, and receiving
less pay, all at his own initiative. Mr. Sokol worked for
petitioner until his death on November 26, 1993.
In 1988, petitioner entered into a continuing guaranty with
Texas Commerce Bank-San Antonio for $3 million. Mr. Bennett
personally guaranteed petitioner's obligation. In 1989, Mr.
Sokol agreed to guarantee personally petitioner's line-of-credit.
In 1990, petitioner's credit line was amended and increased to
$6.5 million. In 1991, the line-of-credit was increased again to
$11.5 million, and Mr. Sokol was removed as a guarantor.
Petitioner prospered under the leadership of Messrs. Bennett
and Sokol. The following chart reflects the yearly increases in
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Last modified: May 25, 2011