Martin Ice Cream Company - Page 1

                                          110 T.C. No. 18                                               

                                     UNITED STATES TAX COURT                                            

                            MARTIN ICE CREAM COMPANY, Petitioner v.                                     
                         COMMISSIONER OF INTERNAL REVENUE, Respondent                                   

                  Docket No. 1477-93.               Filed March 17, 1998.                               

                       A and his son M were shareholders of MIC, an S                                  
                  corporation that distributed ice cream products to                                    
                  supermarket chains, independent grocery stores, and                                   
                  food service accounts.  MIC's supermarket business was                                
                  largely attributable to the close personal relation-                                  
                  ships that A had developed and maintained for decades,                                
                  beginning before the creation of MIC in 1971, with the                                
                  owners and managers of the supermarket chains.  Since                                 
                  1974, MIC had distributed the ice cream products of HD,                               
                  pursuant to an oral agreement entered into between A                                  
                  and the founder of HD.  In 1987 and 1988, following the                               
                  acquisition of HD by a public company, HD initiated                                   
                  negotiations with MIC to acquire MIC's rights to                                      
                  distribute HD ice cream products to MIC's customers.                                  
                  After some but not all terms of the acquisition had                                   
                  been negotiated in the 1988 negotiations, A and M                                     
                  caused SIC, a wholly owned subsidiary of MIC, to be                                   
                  created, and HD was notified that SIC would be the                                    
                  seller of the assets that HD wished to acquire.  MIC                                  
                  then transferred to SIC all of MIC's rights to                                        
                  distribute HD ice cream products to the supermarket                                   

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