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(iii) The occurrence of a Dissolution Event
[defined as “the resignation, expulsion, bankruptcy,
death, insanity, retirement, or dissolution of the
Manager”] if the Company is not continued * * * [by a
majority vote of the members within 90 days of the
event]; or
(iv) At such earlier time as may be provided by
applicable law.
Upon dissolution, distributions in liquidation were to be made
first to creditors, then to repay member loans, and finally to
members with positive capital account balances in proportion
thereto.
Subsequent to completion of the foregoing formalities,
petitioners on December 22, 1995, made further contributions to
Treeco. On that date petitioners contributed cash in the amount
of $5,000,000 and publicly traded securities valued at
$2,918,956. The cash and securities were held by Treeco to serve
as working capital and to finance additional purchases of tree
farm property.
Then, on December 29, 1995, petitioners commenced a program
of gifting interests in Treeco to family members. Petitioners
transferred 500 voting and 700 nonvoting units in Treeco to each
of their eight children and to the spouse of each such child. At
that time, each donee executed an acceptance of the Treeco
Operating Agreement. Petitioners reported the 1995 gifts of
Treeco units on timely filed gift tax returns and elected on
those returns to treat the gifts as made one-half by each of the
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