- 8 -
that he had retained Mr. Hrynik for assistance on tax and ac-
counting matters relating to the MSSTA transaction. Mr. Bosworth
informed Mr. Harrison, Mr. Hall, and AST's attorney, as well as
Mr. Scott, but not Ms. Scott, that he was not representing MSSTA
and the Scotts with respect to any tax matters.
Around the end of August 1989, Mr. Scott asked Mr. Hall what
the tax consequences would be to MSSTA and the Scotts under the
tentative agreements that had been reached regarding the MSSTA
transaction. Mr. Hall responded that (1) MSSTA's tax liability
would be approximately $100,000 if it reported the $600,000 that
AST had tentatively agreed to transfer directly to it as the
amount realized from the sale of its assets; (2) there would be
no tax consequence to MSSTA as a result of AST's payment directly
to Mr. Carter of $200,000 of the total $800,000 that AST was
willing to pay for MSSTA's assets; and (3) based on the tax law
relating to capital gains, the Scotts would owe tax on the capi-
tal gains that they would realize when MSSTA made liquidating
distributions to them as 48-percent stockholders of MSSTA of
approximately $300,000, which tax would be equal to about one-
third of such gains. Because of that capital gains tax that the
Scotts would owe, they would not have sufficient cash from the
MSSTA transaction to purchase the entire 33-percent stock inter-
est in AST which they wanted to acquire and to which Mr.
Harrison, Mr. Hall, and AST had tentatively agreed, and they
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011