- 19 - 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...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011