- 11 -
issued to its shareholders, Mr. Spencer and Mr. Boozer.9
Following SPC-SC's incorporation, Mr. Spencer and Mr. Boozer each
owned 50 percent of SPC-SC's stock. During the years in issue,
SPC-SC was a calendar year S corporation within the meaning of
section 1361. Mr. Spencer was the chief executive officer and
treasurer of SPC-SC, and Mr. Boozer served as its chief operating
officer. Petitioner Patricia M. Spencer (Mrs. Spencer), also a
corporate officer, worked at SPC-SC as an office clerk.
Nominal Resale of Carolina Assets to SPC-SC
During June 1987, the SPC-SC shareholders, Mr. Spencer and
Mr. Boozer, nominally conveyed the same assets acquired in the
Carolina transaction to SPC-SC in consideration of $1,170,000.
Neither that conveyance nor the consideration for the transaction
(hereinafter referred to as the SPC-SC nominal debt) was
documented.10
Payment Flow
All payments on the $900,000 S/B note and the $250,000 bank
loan have been made from SPC-SC's current corporate revenues. No
payments have been directly made by the SPC-SC shareholders, Mr.
Spencer and Mr. Boozer.
9 Mr. Boozer is unrelated to Mr. Spencer.
10 The parties stipulated that the "note" from SPC-SC to the
SPC-SC shareholders was never documented. We take this
stipulation to mean that the consideration given by SPC-SC to its
shareholders took the form of a debt that was never documented by
a note.
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