- 14 -
Southern Auto to be issued to Bob, and the board of directors
authorized the 10 shares of common stock to be issued on a
specific date. After August 24, 1993, and until termination of
the stock purchase agreement, Bob was consistently treated as if
he were a shareholder.
The termination agreement states that Bob was never a
shareholder, but this after-the-fact agreement, when weighed
against the other facts in these cases, is not persuasive. The
agreement states that it is a “Stock Purchase Agreement” and a
number of references are made to the term “stock purchase” in the
agreement. The agreement also states that Bob gave up all of his
right, title, or interest in Southern Auto. This statement would
be unnecessary if Bob were working solely for commission and had
no ownership interest. We believe this is an acknowledgment that
Bob was more than just an employee. Petitioners never had any of
their employees sign such a contract.
Bob was treated as a shareholder, and he received the
benefits of being a shareholder. We find he was a shareholder in
Southern Auto for the last third of 1993 and for all of 1994.
Under section 1366(a), Southern Auto's items of income,
deduction, and loss must be divided pro rata among Frank, Thomas,
and Bob as prescribed by section 1377(a)(1). Petitioners do not
contest respondent's calculations. Accordingly, we sustain
respondent's determinations as to the reallocation of Southern
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011