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of organization, Titan was formed for “the continuation of the
business formerly operated as Onex [Farms].” Assets distributed
to Lever and Pencot in the liquidation of Onex Farms (including
the Georgia farm) were transferred to Titan. Petitioner
considered the termination of Onex Farms and creation of Titan to
be little more than a name change. The record does not establish
how Lever (a 20-percent partner according to the final
partnership return of Onex Farms, or a 33-1/3-percent partner
taking into account petitioner’s surrender of the distributed
partnership interest) acquired a 50-percent partnership interest
in Titan.
At the time Titan was formed, petitioner intended to
liquidate Lever. Titan’s operating agreement states as follows:
Members contemplate that Lever, Inc. may liquidate.
Should it liquidate, notwithstanding the restrictions
against transfer of an interest, the Company will
continue and there shall be a single transfer of Lever,
Inc.’s interest to its current shareholder of record,
Jerome J. Klawitter, Ph.D. The transfer must be made
within one year of the date of this agreement.
Lever was liquidated on July 5, 1994, and, as planned,
petitioner acquired Lever’s ownership interest in Titan. As of
the close of 1994, petitioner owned 50 percent of Titan. The
other 50 percent was owned directly or indirectly by Dr.
Chambers.
Little is known about petitioners’ 1993 Federal income tax
return since it has not been made part of the record.
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