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to Mr. Marcus, we would expect FRC to have paid Mr. Marcus double
the amount of monthly dividends that it had previously been
paying. Therefore, the nonpayment of dividends after April 1997
merely indicates that FRC was not sure what Mr. Dunne’s status
was after the settlement agreement.
The fact that Mr. Dunne was not compensated for any taxes
relating to FRC’s income after the settlement agreement favors
petitioners. FRC generally had a practice of compensating its
shareholders for the income taxes they owed by virtue of their
stock ownership. Had FRC considered Mr. Dunne to be a
shareholder, it would have paid the amount of the taxes either to
or on behalf of Mr. Dunne.
Throughout Mr. Dunne’s correspondence with FRC’s bank and
the bank’s attorney in September and October 1997, Mr. Dunne
repeatedly asserted that he was a director, officer, and coowner
of FRC. Mr. Dunne’s request for proof that he did not have those
titles after the bank denied him access to certain records
suggests that he asserted those titles with the belief that they
entitled them to this access. Mr. Dunne also used those titles
when he wrote to an FRC employee to request copies of FRC’s Form
1120S and his Schedule K-1 for 1997.
Petitioners argue that Mr. Dunne asserted these titles
because he retained legal ownership of FRC and he believed he had
rights as a creditor of FRC. Petitioners also rely on Mr.
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