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The original One Price also issued 10,000 shares of common
stock and 62,000 shares of Class A nonvoting common stock with a
par value of $.10 per share. On August 30, 1985, petitioner
bought 1,000 shares of the original One Price common stock for
$100. The owners of the newly issued shares of original One
Price stock were as follows:
Number of Cost
Shareholder shares purchased Class basis
Arlene Karp 4,000 common $400
Henry Jacobs 4,000 common 400
Petitioner 1,000 common 100
Raymond Waters 500 common 50
John Waters 500 common 50
Total 10,000 common 1,000
Henry Jacobs 54,560 Class A, nonvoting $5,456
Raymond Waters 7,440 Class A, nonvoting 744
At the end of 1985, petitioner owned 31,000 shares of the
original One Price stock.
3. The Karp Option
Mrs. Karp owned 124,000 shares of original One Price stock.
On December 17, 1986, she sold petitioner, Waters, John Waters,
and Jacobs (the four founders) an option to buy her stock for
$4,860,000. Each of the four founders paid $1,250 for the option
($5,000 total) and agreed that they would each receive 31,000
(one-fourth) of Mrs. Karp’s shares.
On January 30, 1987, the four founders exercised the option
and each bought 31,000 shares from Mrs. Karp for $1,215,000. To
pay for the shares, each of the four founders immediately resold
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