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time, Mr. Turner offered to forgive petitioner’s $22,000 debt to
Union Machine and to pay petitioner an additional $10,000 for his
ownership interest. Petitioner did not accept the offer.
Since leaving Union Machine, and through the year in issue,
petitioner did not sign any document purporting to relinquish his
interest as a shareholder in Union Machine, nor did he take any
legal action to terminate such interest in Union Machine. In
addition, Union Machine has not provided petitioner with any
consideration in exchange for redemption of his shares, and Mr.
Turner has not commenced a declaratory judgment action to become
the sole shareholder.8
In July 1999, petitioner filed for bankruptcy protection
under chapter 7 of the Bankruptcy Code. In his bankruptcy
filing, petitioner disclosed his shareholder interest in Union
Machine but did not assign a value to it. The bankruptcy court,
however, did not administer petitioner’s shareholder interest as
part of the bankruptcy estate. In November 1999, the bankruptcy
court discharged, inter alia, petitioner’s Household Finance loan
and his debt to Union Machine of $22,000.9
On December 7, 1999, Union Machine held its annual meeting
8 Since late 1998, Union Machine has not had an occasion
requiring action by a two-thirds vote of the stockholders.
9 Around this time, Mr. Turner again offered to buy
petitioner’s ownership interest. Petitioner did not accept this
offer.
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Last modified: May 25, 2011