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In 1985, Elmer tried to equalize ownership of the Madison
preferred stock. His accountant informed him that, to equalize
their ownership positions, Madison could issue 1,200 additional
shares to petitioner or Elmer could sell 600 of his shares to
petitioner. Petitioner and Elmer agreed that it would be easier
to have Elmer sell 600 shares of his preferred stock to peti-
tioner. This transaction never occurred, however, due to
concerns over the Bank's financial stability.
Elmer died on May 6, 1990. Elmer's widow, Beth, was
appointed executrix of his estate. Beth soon discovered the
disparity in petitioner and Elmer's preferred stock ownership.
After some discussions between the respective families, an
agreement was drafted which acknowledged the disparity and
provided for a transfer of 600 shares of Madison preferred stock
to petitioner from Elmer's Estate in exchange for $60,000. This
agreement was signed by petitioner and his family, but Elmer's
heirs refused to sign. Shortly thereafter, Elmer's heirs
expressed a desire to retain majority ownership in Madison.
When petitioner realized that Elmer's heirs intended to
retain majority control, he became concerned that this would
adversely impact the management of the Bank. In February 1991,
petitioner passed a corporate resolution whereby Madison
attempted to redeem 1,500 shares of preferred stock and 1,054
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