Estate of Mary D. Maggos - Page 9

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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               intent and the transaction must be rescinded on the                    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               
                    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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