John S. and Christobel D. Rendall - Page 25

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          concludes:  “Therefore, in light of the facts, the gain from the            
          sale of such stock is properly taxable to Mr. Rendall.”                     
               We agree with respondent.  There is no evidence in the                 
          record to indicate that the pledge agreement was “fraudulently              
          procured”, as petitioners allege, nor is there any evidence that            
          Merrill Lynch sold the 634,100 shares of pledged Solv-Ex common             
          stock in any capacity other than as a pledgee in order to satisfy           
          Mr. Rendall’s debt to it.  Merrill Lynch sold only enough shares            
          to satisfy Mr. Rendall’s outstanding debt obligation under his              
          margin loan account.13  The remaining pledged shares were                   
          returned to Mr. Rendall within 1 month from the last sale of                
          pledged stock.  Those circumstances suggest that Merrill Lynch’s            
          sole purpose in securing the pledge of Solv-Ex common stock from            
          Mr. Rendall, and his sole purpose in pledging that stock, was to            
          provide security for the repayment of his debt to Merrill Lynch,            
          and we so find.                                                             
               Petitioners suggest that Merrill Lynch’s demand for                    
          repayment of the margin loan was unwarranted because, at that               
          time, the value of the pledged shares was over $40 million, and             

               13  On May 2, 1997, Merrill Lynch demanded repayment by Mr.            
          Rendall of $4,195,022.80 “plus all accrued interest”.  The sale             
          of 634,100 pledged shares between May 28 and June 4, 1997,                  
          generated net sales proceeds of $4,229,479.  There is no evidence           
          that Merrill Lynch paid to Mr. Rendall, or that Mr. Rendall                 
          demanded from Merrill Lynch, the $34,456.20 difference.                     
          Therefore, we infer that that difference constituted all or a               
          portion of the accrued interest referred to in Merrill Lynch’s              
          May 2, 1997, letter to Mr. Rendall.                                         





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