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D. Liquidation and Dissolution of House of Babes
House of Babes was liquidated in August 1986. House of
Babes reported on its 1986 corporate income tax return that it
was undergoing a complete liquidation under section 337 and that
all of its assets were to be distributed to its shareholders
within 12 months. The liquidating distribution from House of
Babes to its shareholders occurred on August 14, 1986. The State
of Florida dissolved House of Babes on August 20, 1987.
The buyer made the $100,000 payment in August 1987 and fully
paid the note ahead of schedule.
E. Waldorf's Sale of His Interest in the Note
Waldorf offered to sell his $170,625 ($525,000 x 32.5
percent) interest in the note to the buyer's shareholders for
$50,000. They did not buy it. Waldorf also asked five or six
friends if they wanted to buy his interest in the note. They did
not.
On February 3, 1988 (about 16 months after the liquidation
of House of Babes), Waldorf assigned 47.69 percent of his
interest in the note (i.e., $81,371) to Wiltzius' wife, Darlene
Wiltzius, in exchange for a limousine. Waldorf sold the
limousine for $22,500 at a time not specified in the record. On
March 9, 1988, Waldorf assigned 52.31 percent of his interest in
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