- 40 -
1988, Ms. Bronner stated that H�agen-Dazs, as requested by Mr. Hewit,
would eliminate references to Martin and MIC from the purchase
agreement, but she insisted that H�agen-Dazs had to acquire "any and
all" of the distribution rights owned by Martin, Arnold, and their
respective companies. On June 15, 1988, MIC executed documents
providing for the transfer of supermarket chain and food service
distribution rights, and business records related thereto, from MIC to
SIC. Thereafter, Arnold continued to negotiate with H�agen-Dazs on
behalf of himself and SIC until the purchase agreement was signed on
July 8. The purchase agreement, as finally negotiated and amended at
the closing on July 22, provided that H�agen-Dazs could walk away from
the deal if an audit by a "Big-8" accounting firm disclosed ice cream
sales by petitioner of less than $4 million for the 12-month period
ended May 31, 1988, and for a reduction in both the fixed and deferred
contingent portions of the purchase price if such sales amounted to
less than $4.7 million. On July 22, following the Touche-Ross sales
audit and the parties' agreement that ice cream sales amounted to
$4,528,000, the sales price paid at the closing was reduced to
$1,430,340 and the maximum deferred contingent payments were reduced
to $333,660.
The facts of this case are distinguishable from those of Court
Holding. In Court Holding and other cases applying its holding, such
as Waltham Netoco Theaters, Inc. v. Commissioner, supra, the change in
the identity of the sellers took place at the last minute. In such
cases, the only difference in whether the corporation or all its
shareholders are regarded as the seller(s) lies in whether the
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