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ownership in Central on December 22, 1993. The amounts to be
distributed to the various shareholders were as follows:
Shareholder Allocable Amount of Distribution
Mr. Honbarrier $5,042,772
Mrs. Honbarrier 23,102
Gary L. Honbarrier 967,063
Linda Embler 967,063
Total 7,000,000
With the exception of the amount allocable to Mr.
Honbarrier, all of the declared distributions were paid by check
on December 31, 1993. Central made the $5,042,772 distribution
to Mr. Honbarrier in two parts. The first part was paid via a
$493,626 check drawn on Central’s account on December 31, 1993.
Thus, the cash distributions made to Mr. Honbarrier and the other
shareholders on December 31, 1993, totaled $2,450,854.8 The
second part of the distribution to Mr. Honbarrier was made on
January 3, 1994, and consisted of $4,549,146 in tax-exempt
bonds.9 The tax-exempt bonds distributed to Mr. Honbarrier on
January 3, 1994, were the same bonds acquired by Central from
Colonial in the merger.
For Federal income tax purposes, petitioners treated the
merger as a tax-free reorganization within the meaning of section
368(a)(1)(A) and treated the $7 million distribution as a
8The cash and cash equivalents that Central received from
Colonial on Dec. 31, 1993, totaled $2,472,047.
9The parties have stipulated that Mr. Honbarrier was in
actual or constructive receipt of his entire $5,042,772 share of
the distribution at the close of 1993.
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