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The transfer to petitioner of the stock of 2618 Inc took the
form of a purchase. Nominally, petitioner agreed to purchase
Helmle’s stock in 2618 Inc for a stated consideration of $10 in cash
and a $500,000 promissory note. Petitioner, however, was not
personally liable on the $500,000 promissory note, and petitioner
never made any payments on the promissory note.
The purported stock purchase agreement between petitioner and
Helmle, dated March 15, 1988, was conditional and provided that the
transfer to petitioner of the stock of 2618 Inc would not be
effective unless and until TABC granted 2618 Inc's application for
mixed beverage permits. On July 5, 1988, petitioner and Helmle
reduced the stated principal amount of the promissory note that had
been executed by petitioner in favor of Helmle from $500,000 to
$300,000. Petitioner also was not personally liable on the revised
$300,000 promissory note, and petitioner never made any payments on
the $300,000 promissory note.
In 1988, before conditions associated with the transfer of the
stock were satisfied, petitioner represented himself to third parties
as the sole stockholder of 2618 Inc.
On September 20, 1988, the litigation with TABC essentially was
resolved, 2618 Inc was issued mixed beverage permits, and transfer to
petitioner of the outstanding stock of 2618 Inc became effective.
In fact, the purported March 15, 1988, agreement under which
petitioner was to purchase from Helmle the stock of 2618 Inc was a
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