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corporations, and the remainder was owned by Mr. Beda. Since the
inception of Venturedyne and Carnes, petitioner has served as the
chairman of the board of directors, president, and chief executive
officer of both entities.
Following the purchase of Wehr's assets and the assumption of
Wehr's liabilities by the S corporations, Wehr was liquidated. The
S corporations continued to operate the same businesses as operated
by Wehr prior to its liquidation.
Among the assets acquired by the S corporations were all
lawsuits brought by Wehr, including the claim against Xerox. The
liabilities assumed by the S corporations included all lawsuits
brought against Wehr, including Xerox's counterclaim. Because the
parties to the buy out of Wehr did not allocate the purchase price
to specific assets, the S corporations engaged two accounting firms
to assist in that process. The accounting firms attempted to
determine a value for the Xerox lawsuit, but no value was assigned
to Wehr's claim against Xerox because the accountants determined
that the value of such claim was "too speculative". Thus, no
portion of the purchase price for Wehr's assets was allocated to
the Xerox lawsuit, and neither of the S corporations booked the
lawsuit as an asset. (However, a footnote in the S corporations'
audited financial statements identified the existence of the claim
against Xerox.) In a Closing Agreement On Final Determination
Covering Specific Matters between the S corporations, petitioners,
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