- 4 -
1995 1996 1997
Current Assets:
Cash $ 818,960 $ 381,039 $ 945,413
Accounts receivable 2,569,616 2,565,656 2,334,468
Inventories 651,151 692,309 659,987
U.S. Govt. obligations 1,157,819 1,218,717 905,017
Certificates of deposit –- –- 188,000
Less Current Liabilities:
Accounts payable (172,506) (125,570) (123,562)
Federal tax payable (55,014) -- --
Net liquid assets $4,970,026 $4,732,151 $4,909,323
Stock Ownership and Redemption
At the time that petitioner incorporated in 1927, two
brothers owned all of petitioner’s stock. All of petitioner’s
stock has since been owned by the descendants of the two brothers
or spouses of the descendants. The Knight family, consisting of
Sam and Jan Knight, David and Gina Gunn, and Jeremy Knight, were
the controlling stockholders of petitioner during the years in
issue. During 1995, the Knight family held 51 percent of the
total outstanding stock. The Pedigo family, consisting of Paul
Pedigo, David and Sharon Pedigo, and Steve and Susan Pedigo, held
47 percent of the total outstanding stock.
During 1996, the Knight family owned 56 percent and the
Pedigo family owned 42 percent of the outstanding stock. After
David Pedigo’s demotion and removal from the board in January
1996, the stockholders met on March 26, 1996, to elect a new
board. David Pedigo nominated himself, and his wife, Sharon
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