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issued 30,000 shares of common stock with a par value of $1 per
share. On June 29, 1984, petitioner bought 3,000 shares of J.K.
Apparel stock for $3,000. The owners of J.K. Apparel's shares
were as follows:
Number of Percentage of Cost
Shareholder shares purchased shares purchased basis
Arlene Karp 12,000 40% $12,000
Henry Jacobs 12,000 40 12,000
Petitioner 3,000 10 3,000
Raymond Waters 1,500 5 1,500
John Waters 1,500 5 1,500
Total 30,000 100 30,000
On August 23, 1984, J.K. Apparel opened its first one price
women's clothing store in South Carolina.
2. One Price Clothing Stores, Inc.
In 1985, petitioner and the other shareholders of J.K.
Apparel decided to change the name of the corporation and to
reincorporate in South Carolina. On August 28, 1985, One Price
Clothing Stores, Inc. (the original One Price), was incorporated
in South Carolina.
On August 30, 1985, J.K. Apparel merged into the original
One Price. The original One Price was the surviving corporation.
As part of the merger, the shareholders of J.K. Apparel received
10 shares of original One Price common stock for each of their
shares of J.K. Apparel. Thus, petitioner received 30,000 shares
of original One Price common stock in exchange for his 3,000
shares of J.K. Apparel stock.
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