- 8 - The acquisition took the form of a stock purchase whereby Helmle’s stock was transferred to petitioner in exchange for $10 in cash plus a $500,000 promissory note on which petitioner never made any payments. In the earlier case involving petitioner’s 1987 and 1988 taxable years, we found as a fact that the March 15, 1988, agreement was a sham and that petitioner received the stock of 2618 not by purchase, but as payment in satisfaction of the more than $500,000 in legal fees owed to him by 2618 and by Helmle.8 The agreement was conditional, to become effective if and when TABC granted 2618's application for a mixed beverage permit. That condition was satisfied when, in August 1988, a settlement agreement was reached between TABC and the club pursuant to which TABC agreed to and did issue the permit to the club effective September 20, 1988. Prior to that date, petitioner had become president of 2618. Transfer of the Club to JKP Enterprises, Inc. (JKP) On February 20, 1988, petitioner entered into an agreement (the February 20 agreement) with the owners of the building in which the club operated whereby it was agreed that (1) petitioner had replaced 2618 as primary lessee by virtue of his February 15, 1988, acquisition of 2618's leasehold interest in the premises, 8 Petitioner did not contest our characterization of the transaction as a payment in-kind for overdue legal fees. Rather, he contended that the 2618 stock was worthless at the time he received it. See Payne v. Commissioner, 224 F.3d 415, 419 (5th Cir. 2000), revg. T.C. Memo. 1998-227.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011