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operations. Because those operations were in such close proxim-
ity to the Cherrydale residence, Mr. Stone and Stone Manufactur-
ing decided that that residence could serve as a place to house
out-of-town business visitors to its facilities. To that end, in
late summer 1995, renovation work commenced on the Cherrydale
residence and was completed in the fall of 1997. During that
renovation, the Cherrydale residence was uninhabitable.
In 1976, Mr. Stone formed Stones, Inc., as a holding company
of Stone Manufacturing and owned 100 percent of the common stock
of that holding company. (For convenience, we shall sometimes
refer to Stones, Inc., and Stone Manufacturing, separately and
collectively, as the Company.) From 1976 until April 1997, Mr.
Stone owned a preferred stock interest in Stones, Inc.
On December 30, 1976, Mr. Stone made a gift of 2,250 shares,
or 50 percent, of the common stock of Stones, Inc., to each of
two trusts (collectively, the trusts) that he established, one
for the benefit of his children and one for the benefit of his
grandchildren. At the time the trusts were formed, Stones, Inc.,
owned 83.4 percent of the common stock of Stone Manufacturing.
At that time, C. Rivers Stone, who became president of Stone
Manufacturing shortly before Mr. Stone established the trusts,4
4C. Rivers Stone, who as a teenager began working for Stone
Manufacturing during the summers, remained president of Stone
Manufacturing until around 1999 when he stopped working for the
Company.
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