- 49 -
We focus solely on petitioner’s assertion that it was
accumulating earnings for a stock redemption and analyze whether
this need was: (1) A bona fide reason for the accumulation and
(2) a reasonable business need. We decide both prongs of this
analysis adversely to petitioner. As to the first prong,
petitioner lacked as of the end of each subject year a specific,
definite, and feasible plan to use a set portion of its
accumulated earnings to redeem part of its stock. The record
indicates that: (1) Neither petitioner’s officers nor its
directors ever discussed in earnest Rubin’s suggestion in 1989
that petitioner begin accumulating funds for a possible
redemption of the disputed shares, (2) petitioner never
considered meaningfully the amount of funds that would be
necessary to effect such a redemption,18 or whether the family
lawsuit plaintiffs, given John’s testamentary intent, were
receptive to a redemption of their shares, and (3) petitioner
never undertook a meaningful study of the value of the disputed
shares or the likelihood that Emile and Louise would lose the
18 We find incredible Haff’s testimony that petitioner
needed to retain $10 million as a contingency for the family
lawsuit. In this regard, we give no weight to Richard’s offer to
settle for $20 million his lawsuits against Emile and Louise,
individually, and as executors of the wills of John and Emma, or
Emile and Louise’s counteroffer on July 27, 1990, proposing, in
part, to settle Richard’s lawsuits by redeeming his shares in
petitioner, Haffner Realty, and Fournier Realty for a total
payment of $300,000. The counteroffer stated that Richard owned
10 percent of petitioner’s nonvoting stock, approximately 10
percent of the nonvoting stock of Haffner Realty, and
approximately 6 percent of the nonvoting stock of Fournier
Realty.
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