- 30 -
after the settlement agreement. Benefits and burdens of stock
ownership generally include sharing in the successes and failures
of the corporation and receiving dividends. Id. at 875-876;
Yelencsics v. Commissioner, 74 T.C. at 1528.
Before the settlement agreement, Mr. Dunne shared in the
successes and failures of FRC because those successes and
failures affected the value of his stock. After the settlement
agreement, Mr. Dunne ceased to share in most of the business
successes and failures of FRC because he agreed to sell his stock
for the book value of FRC and his share of the halon contract.
Mr. Dunne and Mr. Marcus agreed to set the book value of FRC at
$175,000, and there is no indication that either Mr. Dunne or Mr.
Marcus could renegotiate that amount if the value of FRC were to
change substantially between May 8, 1997, and the settlement
date. Therefore, with the exception of FRC’s performance on the
halon contract, FRC’s successes and failures had no economic
effect on Mr. Dunne after May 8, 1997.
Mr. Dunne received monthly dividends from FRC from January
through April of 1997, but he received no dividends after the
settlement agreement. Had Mr. Dunne retained beneficial
ownership of FRC, we would expect these dividends to have
continued through the end of 1997. However, Mr. Marcus also
ceased receiving dividends after April 1997. Had the settlement
agreement transferred beneficial ownership of Mr. Dunne’s shares
Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Next
Last modified: March 27, 2008