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between the sales price paid by H�agen-Dazs to Arnold and SIC and
the value of petitioner as an ongoing business just before the
split-off. The sales figures from petitioner’s tax returns show
that the supermarket business generated slightly more than one-
half of the pre-split-off sales. Were petitioner to have been
the owner of the rights sold to H�agen-Dazs, then the $1,430,340
paid to Arnold and SIC would have been approximately half the
value of petitioner, and petitioner would presumably have had an
overall fair market value approaching $3 million, a conclusion
that would logically follow from respondent’s arguments. For
reasons discussed infra, $3 million far exceeds any possible fair
market value that petitioner, as a corporation with less than
$8.5 million in gross sales and $70,000 net income in its best
year, fiscal 1987, might have had immediately before the
transactions in issue.
Our conclusion is not impaired by the fact that the
corporate documents created by Mr. Hewit to accomplish the
transfer of some of petitioner’s assets to SIC and the
distribution of SIC stock to Arnold purported to transfer
supermarket distribution rights owned by petitioner.14 We have
14 We note that the record contains no documents that
actually transfer assets from MIC to SIC in exchange for SIC
stock. The record contains only the MIC corporate resolutions
stating the intention to make such transfer. However, we are
satisfied by those corporate resolutions and testimony by Arnold,
Martin, and Mr. Hewit that such a transfer did occur, in the
sense that petitioner transferred to SIC the records of the
(continued...)
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