- 17 - infra p. 23); the exception, which amounted to 24 percent8 of the total shares initially issued, was for more than book value. In 1967, after having acquired all outstanding shares, the Trues caused Belle Fourche to make an S corporation election. Belle Fourche relied on shareholder loan, rather than equity, as its main source of financing after electing S status. Between March 31, 1971 (the company’s fiscal yearend), and June 15, 1971, Dave and Jean True received earnings distributions of approximately $2.8 million,9 thereby reducing reported book value from $99.90 to $38.69 per share. In August 1971, the True children each purchased a 1-percent interest in Belle Fourche from the corporation. The True family’s accountant, Cloyd Harris (Mr. Harris), advised the True children also to lend money to Belle Fourche so that each stockholder’s pro rata share of outstanding loans to the corporation would reflect his or her percentage interest. This was intended to preserve Belle Fourche’s S corporation status by avoiding the appearance of a second class of stock. The True children paid $38.69 per share to purchase the stock (476 shares each) and lent the company $127.26 per share at 8-percent 829,244 shares (redeemed December 1962 at $17/share vs. book value of $13.13/share) divided by 120,004 shares (issued at formation) equals approximately 24 percent (rounded). 9$4,569,000 (book value at 3/31/71) less $1,769,500 (45,734 shares outstanding x $38.69 book value/share at 6/15/71) equals $2,800,000 (rounded) decrease in book value due to distributions made within 2-1/2 months after fiscal yearend.Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
Last modified: May 25, 2011