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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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