- 8 -
by time * * * would work." In the addendum of March 30, 1988, he
dismissed his prior concern altogether by what he called a
"break-through"; namely, the major decline in individual tax
rates. This would enable the shareholders to use corporate funds
to purchase the remainder interests, albeit at a small tax cost.
More specifically, Mr. Page suggested having the corporation
declare dividends and make stock redemptions sufficient to
generate after-tax funds for the purchase of the remainder
interests.
In another letter dated April 6, 1988, Mr. Page described in
somewhat greater detail how the joint purchase transaction would
take shape.7 Partnerships would be formed, and, where a corpora-
tion purchased a term of years in such newly created partner-
ships, its shareholders, in turn, would purchase the remainder
interests. Attached to the letter, Mr. Page provided a partner-
ship agreement form and supplemental agreements related thereto.
In order to make their purchases, the shareholders would receive
a major portion of the funds "from the after-tax proceeds of a[n]
* * * extraordinary dividend". Although Mr. Page recognized that
the amount distributed would be subject to "the so-called double
tax * * *, i.e., once when earned by the corporation and again
when made available to the corporat[ion's] shareholders", his
6(...continued)
to amortize the cost of that interest for income tax purposes."
7Although the letter was addressed to Garvey Industries,
Inc., and its shareholders, CGF and Lincoln's shareholders
received similar letters from Mr. Page.
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