[Letter from Roy P. Bennett to I. H. Kempner, III, March 24, 1971] Page: 1 of 4
This letter is part of the collection entitled: Harris and Eliza Kempner and was provided to The Portal to Texas History by the Rosenberg Library.
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INTER-OFFICE LETTER
FOR MR. I. H. Kempner, III DATE March 24, 1971
SUBJECT Tax Aspects of Tender by Imperial to Family Stockholders 4-70 2M A-3229
WRITE ON BUT ONE SUBJECT TO BE USED BY ALL OFFICERS OR DEPARTMENT
ON THIS SHEET HEADS FOR INTER-OFFICE CORRESPONDENCE
Monday afternoon I talked with Bill Griffiths concerning the question of
whether payment by Imperial for its stock would constitute ordinary
income or a capital gain to the selling stockholders.
1.
If Imperial were to make a tender on a pro rata basis to
all stockholders, Bill says this would result in ordinary
income to the selling stockholders to the extent of their
profit. In effect, we have here the reverse of a stock
dividend in that pursuant to such tender each stockholder
maintains his pro rata share of stock ownership without
change.
2.
Apparently there is no problem if there is no tender
and the Company manages to buy in the shares of a
stockholder who is not a member of the family.
3.
If a member of the family is involved, then under the
family attribution rule his stock is added to that of his
parents and children so as to compose one block.
Brothers, uncles, cousins, etc. are not included but
only the direct line of ascent or descent.
As I understood the situation, to enjoy a capital gain treatment the selling
shareholders pro rata ownership (including stock of parents and children)
would have to vary by more than 20% after the sale is consummated.
Moreover, the selling shareholder would have to agree that he would not
become an officer or director of the corporation or acquire future stock
in the Company for a specified period of time.
Bill states that the rule is rather tricky and if the occasion arises, it
would be wise to consult him as to the specific facts before any dealI
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Bennett, Roy P. [Letter from Roy P. Bennett to I. H. Kempner, III, March 24, 1971], letter, March 24, 1971; (https://texashistory.unt.edu/ark:/67531/metapth1210212/m1/1/: accessed June 3, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting Rosenberg Library.