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shareholders on other than a pro rata basis (in accordance with
their respective stock ownership percentages). See sec. 1.1361-
1(l)(2)(vi), Example (2), Income Tax Regs. (indicating that
differences in the timing of distributions to shareholders do not
cause an S corporation to be treated as having more than one
class of stock).13
2. Purpose and Nature of the Fixed Distributions to
Julian E.
The only support for petitioner’s argument that, in 1986,
the directors/shareholders of LPP agreed to make fixed
distributions to Julian E. in amounts necessary to cover his (and
Alma’s) living expenses is petitioner’s testimony to that effect.
But that testimony is contradicted by the Louisiana Court of
Appeal’s description of petitioner’s trial testimony and by
petitioner’s affidavit and a deposition given in connection with
the Louisiana litigation, all of which indicate that all or a
portion of the fixed distributions to Julian E., commencing in
1986, were made for the purpose of paying him (through LPP) for
his 1986 sale of LPP stock to Julian W. and petitioner. If that
is so, it follows that some or all of the distributions to Julian
13 In this connection, we note the absence of evidence that
any disproportionate distributions to Julian E. prior to 1996,
when he ceased to be a shareholder in LPP, would not be offset by
future remedial distributions to the other shareholders out of
LPP’s substantial retained earnings, which totaled $582,933 at
the end of 1996. Moreover, the payment of $14,786 in 1995 on
behalf of Julian W. for the purchase of a boat indicates that
remedial payments could occur whenever Julian W. or petitioner
needed distributions in excess of LPP’s tax payments on their
behalf. That payment also indicates that all of the shareholders
were on equal footing vis-a-vis profit distributions from LPP in
that all were entitled to distributions on an as-needed basis.
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