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1. Theft.
The redemption constituted a theft under state law.
* * *
2. Fraud.
No gift was made because Petitioner was swindled. * * *
3. Mistake.
Under Hawaii law, a party to a contract may rescind a
contract on the basis of unilateral mistake. * * *
4. Bad Business Bargain.
A transaction entered into in the ordinary course of
business will be considered as made for full and
adequate consideration in money or money’s worth. * * *
Since the redemption was entered into in the ordinary
course, there was no gift. Moreover, the fact that a
familial relationship existed between Petitioner and
the buyer does not preclude the defense of a bad
business bargain. [Citations Omitted.]
Petitioner’s memorandum concludes:
Petitioner intends to prove that the redemption
was a theft procured by fraud, that she lacked donative
intent and the transaction must be rescinded on the
basis of mistake. Alternatively, the redemption was a
bad business bargain. As a further alternative theory,
Petitioner will prove that the fair market value of the
stock was $3 million on the date of redemption. Under
either theory, no gift tax is owed.
Respondent’s Memorandum of Issues
Respondent’s memorandum sets out the following issues of
fact:
1. Whether the redemption of Petitioner’s 56.7%
interest in Pepsi-Cola Alton Bottling, Inc. (PCAB) on
May 1, 1987, for $3,000,000, payable by way of a 10-
year promissory note (providing for monthly payments of
interest only at 8% for the entire 10-year term)
constituted a taxable gift to her son, Nikita Maggos
(Nikita), the owner of the remaining 43.3% of PCAB.
A. Whether the redemption of
Petitioner’s PCAB stock at a stated redemption
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