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LB&M Associates, Inc. (LB&M), an S corporation, had its
principal place of business in Lawton, Oklahoma, at the time the
respective petitions in these cases were filed. The record in
these cases establishes and/or the parties do not dispute the
following.
During 1990, except for Rudy J. Alvarado (Mr. Alvarado) who
became a shareholder of LB&M during that year when he purchased
10 percent of its stock, all of the shareholders of LB&M (selling
LB&M shareholders), including James E. Ferguson, John P. Purcell,
Jr., Bloomer Don Sullivan, Steve Doerfel, Anthony Pokorny, and
Howard Rubin (participating shareholders), sold LB&M a portion of
their LB&M stock (1990 stock sale) in return for which LB&M
issued a promissory note to each such shareholder (promissory
note). As a result of Mr. Alvarado's purchase and the selling
LB&M shareholders' sales of LB&M stock, Mr. Alvarado became a 51-
percent owner of the stock of LB&M.
LB&M and each of the selling LB&M shareholders treated the
promissory note issued to each such shareholder in the 1990 stock
sale as reflecting an indebtedness of LB&M to that shareholder
(alleged LB&M liability). Each of the selling LB&M shareholders
treated the alleged LB&M liability to each such shareholder as an
increase in such shareholder's (1) basis in the indebtedness of
LB&M to such shareholder and (2) combined basis (basis in LB&M)
in (a) such indebtedness and (b) the LB&M stock held by such
shareholder.
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Last modified: May 25, 2011