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petitioners, the sole shareholders of Ridge, pursuant to section
355. We hold that it does not. Our reasons follow.
FINDINGS OF FACT
Introduction
Some facts have been stipulated and are so found. The
stipulation of facts filed by the parties, with attached
exhibits, is incorporated by reference.
At the time the petitions were filed, petitioner Douglas P.
McLaulin, Jr. (McLaulin) resided in Mulberry, Florida, petitioner
Augustus H. King III (King) resided in Lakeland, Florida, and
petitioners Alfred E. and Lynn B. Holland (Holland, when
referring to Alfred) resided in Bartow, Florida.
Ridge and Sunbelt
Ridge was incorporated in 1959 by Richard B. Craney
(Craney). From 1977 until July 25, 1993, the sole, equal
shareholders of Ridge were McLaulin, King (Craney’s stepson), and
Holland. Ridge was engaged in the forest products business.
Ridge was profitable, with more than $13 million in retained
earnings as of July 25, 1993.
On December 31, 1986, Ridge elected to become an
S corporation as that term is defined by section 1361(a)(1)
(S corporation), effective for its taxable year ended July 25,
1988. Ridge qualified as an S corporation for each taxable year
thereafter, through and including its taxable year ended July 25,
1994.
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