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1999 notes), on the basis of Empire’s estimate of the value of
the DGA stock at issue in 1999 ($620).
Petitioner and his sons signed the sale agreements and
promissory notes. The sale agreements included the following
share adjustment clause:
In the event that the value of the Shares is finally
determined in any IRS proceeding to be greater than
$620 per share, the number of shares purchased and sold
hereunder shall be reduced to the number which is the
quotient of $2,480,000 divided by the value per share
determined in such proceeding. In such event, Buyer
shall transfer to Seller, for no additional
consideration, the number of Shares which is equal to
the difference between 4,000 minus the quotient
determined under this Section 1.2.
The 1999 notes5 include the following self-canceling clause:
In the event that Holder shall die before the Maturity
Date, this note shall be deemed to have been paid,
satisfied and discharged on the day before the date of
the Holder’s death.
In 1999, Fay’s estate distributed 544 shares of series B
stock to Robert and 544 shares to David.
2. 2000 Stock Transfers From Petitioner to His Sons
On November 29, 2000, Fay’s estate and the trusts signed an
agreement under which the estate transferred 2,956 shares of
series B stock to each of the trusts, and each trust transferred
to the estate $192,140 in cash and a promissory note for
$1,729,260 (collectively the 2000 notes), on the basis of
5 The maturity date of the 1999 notes is Nov. 29, 2004.
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