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FINDINGS OF FACT
The parties submitted this case fully stipulated in
accordance with Rule 122. The stipulation of facts, with
attached exhibits, is incorporated herein by this reference.
For the calendar year 1990, petitioners filed a joint
Federal individual income tax return. When the petition was
filed in this case, petitioners were husband and wife, and
resided in Leesburg, Florida. Hereinafter, references to
petitioner are to F. Browne Gregg, Sr., and references to
petitioners are to F. Browne Gregg, Sr., and Juanita O. Gregg.
In 1969, petitioner owned corporate businesses in Florida
that were engaged in construction, sand mining, and design of
dredging equipment. The businesses had expanded rapidly and were
hard pressed for working capital. As a result, on August 27,
1969, petitioner entered into an "Agreement and Plan of
Reorganization" with USI, whereby petitioner transferred to USI
the stock of his companies, $1 million in personal capital, and
petitioners’ $500,000 promissory note in exchange for $3.5
million in common and preferred USI stock. The agreement
provided that, as further consideration, petitioner could receive
up to an additional $6.5 million in USI stock if the companies
formerly owned by petitioner met specified profitability levels
over the next 5 years. On the date of closing, October 1, 1969,
a separate "Employment Agreement" was signed under which
petitioner was to remain for 5 years as president and chief
operating officer of his former companies.
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