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B. Spinoff Corporations
To reduce petitioner’s potential liability and to increase
efficiency and growth, Mr. Reeves organized two new corporations
out of petitioner, Club Tan Centers of Oregon, Inc. (CTC), and
Universal Marketing, Inc. (UMI). In December 1994, petitioner
transferred the assets used by Club Tan to CTC, and on June 1,
1995, petitioner transferred the assets used by Universal
Graphics to UMI. All of the stock issued by CTC and UMI was
transferred to Mr. Reeves in a section 355 reorganization
(spinoff) resulting in petitioner, CTC, and UMI becoming brother-
sister corporations.
Mr. Reeves was the president, secretary, treasurer, and sole
shareholder of CTC and UMI. Although his obligations to
petitioner decreased as a result of the spinoffs, as the sole
officer and manager of three corporations, Mr. Reeves had
significantly increased responsibilities.
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