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tanning lotions; Club Tan for its tanning salon services; and
Universal Graphics for its advertising, marketing, and printing
activities.
B. Incorporation of Petitioner
On June 1, 1995, VVI incorporated petitioner and elected an
FYE May 31. On June 1, 1995, VVI also transferred $487 in cash
along with the printing equipment used by Universal Graphics, an
automobile, and fixtures with a total fair market value of
$53,555 in exchange for all issued shares of petitioner’s stock.
The shares of stock were transferred to Mr. Reeves in a section
355 reorganization resulting in VVI and petitioner becoming
brother-sister corporations.3
Mr. Reeves was petitioner’s president, secretary, treasurer,
sole shareholder, and sole manager.
C. Petitioner’s Services
In June 1995, at the beginning of petitioner’s FYE May 31,
1996, VVI entered into an agreement with petitioner, in which
petitioner agreed to brand, market, and advertise skin care and
tanning products sold by VVI for $1 million. Petitioner’s only
other customer was its sister corporation Club Tan Centers of
Oregon, Inc., of which Mr. Reeves was the sole owner and
3 Additionally, in December 1994 VVI incorporated Club Tan
Centers of Oregon, Inc. (CTC), transferred the assets used by
Club Tan to CTC in exchange for all issued shares of CTC’s
stock, and the shares of stock were transferred to Mr. Reeves in
a sec. 355 reorganization.
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Last modified: November 10, 2007