Henry and Esther Misle - Page 10




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            option price), granted HJA the option to purchase Henry’s stock                            
            in HJA for $1,030,000.  The option price was to be paid as                                 
            follows:                                                                                   
                              (i)  The sum of Forty-Eight Thousand Six                                 
                        Hundred Fifty-Three and 62/100 Dollars                                         
                        ($48,653.62), already received by HM prior to                                  
                        execution of this Agreement;                                                   
                              (ii) The sum of One Hundred Seventy-Five                                 
                        Thousand Three Hundred Forty-Six and 38/100                                    
                        ($175,346.38) at the time of the mutual                                        
                        execution and delivery of this Agreement;                                      
                              (iii) Transfer and relinquishment by AM                                  
                        and JM of all of their right, title and                                        
                        interest in and to the securities currently                                    
                        in the possession of HM, valued at                                             
                        approximately Seventy-Six Thousand Dollars                                     
                        ($76,000.00).                                                                  
                  Pursuant to the EOA, HJA transferred funds and assets with                           
            an aggregate value of $286,41111 to Henry for the option to                                
            purchase his stock.  The parties agree that $136,411 of this                               
            amount was investment income to Henry in 1990.  The tax treatment                          
            of the remaining $150,000 is at issue in this case.                                        
                  The EOA required that Henry’s HJA stock be placed in escrow                          
            until the option to purchase Henry’s stock was exercised and the                           
            sale closed.  The EOA, however, gave Abram and Julius effective                            
            control over Henry’s HJA stock beginning in March 1990.                                    

                  11The parties agree that the amount actually paid was                                
            $286,411, despite language in the EOA stating that the aggregate                           
            option price was $300,000.  The parties also agree that the                                
            entire payment is taxable in 1990.  The only issue regarding the                           
            option payment is to whom the disputed balance of $150,000 is                              
            taxed.                                                                                     





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