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In further response to petitioners’ argument based on Mr.
Noble’s testimony, we would observe that our acceptance of this
argument would compromise the integrity of corporate books and
records as evidence of corporate action by encouraging “wait and
see” game playing. Notwithstanding that all corporate action
taken in this case was at the direction and advice of Mr. Noble,
we have only his after-the-fact testimony about the corporate
action that will be taken in response to a decision of the Court
that treats the reduction of the liability as a nullity. There
was no preexisting binding agreement between Mr. Lechner and
Stainless regarding the circumstances, if any, in which the
reduction of the debt on the corporate books would be reversed.8
7(...continued)
reduction created no constructive dividend to Mr. Lechner, he and
Stainless would be content to leave well enough alone by not
undoing the reduction of the receivable. The offer implies that
the reduction did increase Mr. Lechner’s net worth and that a
retroactive restoration of the receivable would be necessary to
prevent the increase from having occurred. If the issue before
the Court had not been raised by respondent’s deficiency notice
to Mr. Lechner, there is no reason to believe that Mr. Lechner
would have voluntarily caused Stainless to restore the
receivable. Nor is there any procedure that we know of (or would
be interested in exploring) under which a decision in Mr.
Lechner’s favor could be conditioned on the restoration of the
receivable. In these circumstances, we accept and take at face
value the stipulation of the parties that the receivable was
reduced in an amount equal to the legal defense fees paid by
Mr. Lechner.
8 Only if the shareholder-employee enters into a binding
repayment agreement with his corporation, prior to the time of
its payment to the employee for which the corporation claims a
(continued...)
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