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contends that the three Pedigo brothers were not dissenting
stockholders and that the Pedigo redemption of stock would not
hurt management, because the Knight family already had 51 percent
of the voting power of the stock and control over the board and
management of petitioner. Respondent views petitioner’s policy
of redeeming stock fully in cash as a retirement vehicle that
allowed stockholders to obtain favorable tax treatment when they
reached retirement age. Respondent also claims that the
redemption of stock does not threaten the survival of the
business or impair the corporation’s ability to continue as a
profitable concern.
The redemption of the stock of dissenting, minority
stockholders is a reasonable need of the business where the
ability to redeem the stock of dissenting, minority stockholders
appears necessary to preserve the existence of the corporation,
or, at least necessary to promote the harmony in the conduct of a
business. See Wilcox Manufacturing Co. v. Commissioner, T.C.
Memo. 1979-92; Farmers & Merchants Inv. Co. v. Commissioner, T.C.
Memo. 1970-161.
The Pedigo family owned less than 50 percent of the stock in
petitioner. Based on the evidence, it was reasonable for
petitioner’s officers to believe that there was dissent and
discord between management and the minority stockholders. The
facts and circumstances that were known to petitioner’s officers
include the demotion of David Pedigo in January 1996; the removal
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