Exhibit,Appendix: ROBERT ROSS et al VS. C.C. MOORE & CO. ENGINEERS

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BENNETT, SAMUELSEN,
REYNOLDS & ALLARD

ALAMEDA, ‘CA 94501-1084
(Gio) 24.7888

JOHN G. COWPERTHWAITE, CSB# 96375
BENNETT, SAMUELSEN, REYNOLDS & ALLARD
A Professional Corporation

Attorneys at Law

1301 Marina Village Parkway, Suite 300

Alameda, California 94501-1084

Telephone: (510) 444-7688

Facsimile: (510) 444-5849

Attorneys for Defendant
SLAKEY BROTHERS, INC.

ELECTRONICALLY
FILED

Superior Court of California,
County of San Francisco

MAR 22 2013

Clerk of the Court
BY: WILLIAM TRUPEK
Deputy Clerk

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF SAN FRANCISCO

ROBERT ROSS and JEAN ROSS, NO. CGC-10-275731
Plaintiffs,
EXHIBIT E
vs.
Date: May 14, 2013
C.C. MOORE & CO., ENGINEERS, et al., pime: 9:30 a.m.
ept.:

Defendants.

{ Trial Date: June 10, 2013U. S. TREASURY DEPARTMENT
INTERNAL REVENUE SERVICE
WASHINGTON 25, D.C.

IN REPLY REFER TO
(:rRtR
ABE

FEB 25 1363

Slakey Brothers, Inc.
1400 North C Street
Sacramento, California

Gentlemen:

This is in reply: to a letter of July 25, 1962, in whicha
ruling is requested on your behalf as to the effect, for
Federal income tax purposes, of proposed transactions
described herein. Reference is also made to letters dated
yee 30, August 3, September 4, November 2, and November 20,
1962. .

Slakey Brothers, Inc. ("Slakey Brothers") is a California
corporation, organized on October 21, 1946, which owns
stock of four subsidiaries, and certain other assets
described herein. It has outstanding 25,000 shares of
Class A common voting stock of which 12,500 shares each
are owned by Roger L. Slakey and his brother William H.
Slakey, It also has outstanding 25,000 shares of Class 3
nonvoting common stock owned as follows:

Roger lL. Slakey and family Shares
Roger L. Slakey, Sre 308
Roger Il. Slakey, dre . 936
Roger L. dr. & Zaida Slakey 1,096
Robert F. & Mercedes C. Slakey 2,032
Thomas J. & Marion Ke Slakey . 2,032
Noel J. Slakey 2,032
Dante J. & Marilyn T. Carmazzi 2,032

The Roman Catholic Bishop of Sacramento 2,032

The Roman Catholic Archbishop of San Francisco 1,047

a Gay

“i90"  aewa” ,

ANNIVERSARY

7Slakey Brothers, Inc. ~ 20

William H, Slakey and family Shares
William H. Slakey Bt
Michael James Slakey 1,974
Michael James Slakey as custodian for

Wn. R. Slakey 399
Harriet MoCabe Slekey . 751
Paul A. Slakey 2,179
Paul A. and Margaret G. Slakey 774
Linda Louise Slakey 3,124
Albert Michael Carli, Jr. 982
Albert Michael and Diane L. Carli 181
Margaret G. Slakey . LL
Adrienne Reese Harris Shs

Slakey Brothers Sacramento, Inc. ("Sacramento") is a California
corporation organized April 16, 1956, and is engaged in the
sale and distribution at wholesale of plumbing, heating and
air conditioning equipment in the Sacramento area. Tt has
outstanding 29,166 shares of Class A voting common stock,
of which 23,934 shares are owned by Slakey Brothers, 3,365
shares by George Biaggi, 595 shares by Robert Slakey, and
1,272 shares by Abbie M. Slakey. It also has outstanding
20,000 shares of Class B nonvoting common stock which are
all owned by Slakey. Brothers, and 7,500 shares of nonvoting
$10 par value preferred stock which are all owned by The
Slakey Brothers, Inc., Employees Profit Sharing Trust
("Profit Sharing Trust").

Slakey Brothers San Jose, Inc. ("San Jose") is a California
‘corporation organized April 16, 1956, and is engaged in

the sale and distribution at wholesale of plumbing, heating
and air conditioning equipment in the San Jose area, It
has outstanding 315,777 shares of Class A voting common
stock, of which Slakey Brethers owns 12,464 shares and

the employees of San Jose own 3,313 shares. It also has
outstanding 15,000 shares of Class B nonvoting commen stock
which are all owned by Slakey Brothers, and 10,000 shares
of nonvoting $10 par value preferred stock which are all
owned by the Profit Sharing Trust.

Slakey Brothers Oakland, Inc. ("Oakland") is a California
corporation organized April 16, 1956, and is engaged in the
sale and distribution at wholesale of plumbing, heating, andSlakey Brothers, Inc. -3e-

air conditioning equipment in the Cakland area. It has out-
standing 22,551 shares of Class A voting common stock of
which Slakey Srothers owns 22,034 shares and the employees
of Oakland own 517 shares. -It also has outstanding 20,000
shares of Class B nonvoting common stock which are all
owned by Slakey Brothers, and 8,900 shares of §10 par

value preferred stock which are all owned by the Profit
Sharing Trust.

Slakey Brothers, Mcdesto, Inc. ("Modeste") is a California
corporation organized April 16, 1956, and is engaged in the
sale and distribution at wholesale of plumbing, heating and
air conditioning equipment in the Modesto area. It has out~
standing 7,500 shares of Class A voting common stock and
8,422 shares of Class B nonvoting common stock which are
all owned by Slakey Brothers.

The Class A common stock of each subsidiary of Slakey
Brothers is identical with its Class B common stock except
with respect to its voting rights.

Slakey Brothers formerly carried on the business of the
sale and distribution at wholesale of plumbing, heating
and air conditioning equipment in Northern California.
Sacramento, San Jose, Modesto and Cakland were formed by
Slakey Brothers on April 16, 1956, and the assets relating
to the business carried on within each named area were
transferred to the respective corporations in exchange
for their common stock.

The only other asset owned by Slakey Brothers at that time
was real property which was thereafter, and remains
currently, partially leased to Sacramento for use in its
wholesale plumbing supply operations. Another portion of
the real property is leased to Seaport Sacramento, Ince,
an unrelated corporation. .

With regard to all the real property owned by Slakey Brothers,
the following is disclosed:Slakey Brothers, Inc.. -4e

Annual
Cost Less Net Fair Net In-
Accumulated Market come
Depreciation Value Approximate

5 years or older

Parcel 3 leased to Slekey

Brothers Sacramento, Inc. $107,398.14 $225,000 $24,000
Unimproved Land facing

N.B. Street 8,500.00 50,000 -O-
Potal $116, 398.00 $275,000 $24,000
Less than 5 years eld

Improvements on property

leased to Slakey Brothers

Sacramento, Ince $121,687.00 $150,000 $ 7,800
Improvements on portion

leased to Seaport

Sacramento, Ince 107,754.18 145,000 12,30
Total $229 4h1.18 $295,000 $20,100

The balance sheet of Slakey Brothers, as of January 31, 1962,
discloses total current assets of $39,552.50, total in-
vestment in the common stock of the four subsidiaries of.
$1,214,456.61, total fixed assets of buildings, street
improvements and land of $331,211.01, and other assets of
$1,666.26. It also discloses total liabilities of
$253,234.41 and total capital of $1,333,651.97.

On February 7, 1958, Slakey Brothers Redding, Inc. ("Redding"),
a California corporation, was organized by Sacramento which
transferred cash to Redding in exchange for all its common
vstock. Redding then purchased a wholesale plumbing supply
business in Redding, California, which it continues to
operate. Sacramento owns all the outstanding stock of

Redding.

It is stated that the stockholders of the Class B common
stock of Slakey Brothers listed above under Roger L. Slakey
and family ("Roger Slakey family"), include, in addition to
Roger L. Slakey, only his children and their spouses. It

is also stated that the stockholders of the Class B common
stock listed above under William H, Slekey and family
("William Slakey family") include, in addition to William He
Slakey, only his children, their spouses, and his grandchild.Slakey Brothers, Inc. “5

Roger L. Slakey has assumed management responsibilities in
Sacramento and Modesto, while William Slakey has assumed
management responsibilities in Oakland and San Jose, It
is stated that consumer demands and market requirements
differ considerably between each area in which the sub-
sidiaries operate. In addition there are basic differences
in the business philosophies of the two brothers.

It is believed that a division into two groups of corpo-
rations will permit managers within the respective areas
to participate in the profits and have a proprietary
interest in the corporations located in that area, achieve
-greater operating efficiency, provide more flexible in-
strumentalities for the development of methods, pricing
and policies best suited to lecal operating conditions,
and avoid indecision resulting from a conflict im the
business policies of the two brothers.

Accordingly, it is proposed to take the following steps:

1. Sacramento and Modesto will each pay pro
rata cash dividends to their Class A and
Class B common stockholders totaling
$77,684. and $60,000. respectively.

2. Sacramento, San Jose, Modesto and Oakland
will each issue new shares of their Class
A voting common stock in exchange for all
the outstanding shares of their Class B
nonvoting common stock (which are all held
by Slakey Brothers) on a share for share:
basise

3, Sacramento, San Jose, Modesto and Oakland
will each issue new shares of $100 par
value voting preferred stock in exchange
for all their outstanding shares of $10
par velue nonvoting preferred stock (which
are all held by the Profit Sharing Trast)
on the basis of one new share of preferred
stock for each ten shares of preferred
stock outstanding.Slakey Lrothers, Inc. Oo"

. Slakey Zrothers will transfer to Oakland
all its assets (other than the common stock
of tts subsidiaries) subject to its liabilities
in exchange for that number of shares of the
Class 4 voting common stock of Oakland which
have aa aggregate par value equal to the net
ook value of the assets received from Slakey
Srothers. It will be assumed that the sum of
the amount of the liabilities to which the
assets Will be subject, plus the amount of
any liabilities assumed, will not exceed the
total of the adjusted basis of the assets
transferred:

5, Slakey Brothers will be lisuidated and the
Class A voting common stock of Sacramento
and Modesto will be distributed to the

Roger Slakey family and The Roman Catholic
Bishop of Sacramento ("group A shareholders")
on a pro rata-basis in exchange for all the
Class A and Class B common stock of 3lakey
Brothers held by them; end the Class A common
stock of Oakland and San Jose will’ be distri-
puted to the William Slakey family and the
Poman Catholic Archbishop of San Francisco
(“group B shareholders") in exchange for

all the Class A and Class B commen stock

‘of Slakey Brothers owmed by them. Tumediately
thereafter, Slakey Brothers wiil dissolve.

It is stated that the management has no knowledge of any
concerted plan by any of the shareholders to sell or otherwise
dispose of any of the stock of the subsidiary corporations
when received, and has no intention to liquidate them or
dispose of substantially ell their assets following the re-
organization, .

Based solely on the information submitted, and the assumptions
set forth above, it is held as follows:Sleakey Srothers, Inc. -2-

Q)

(2)

The distribution by Sacramento of 377,634 and
by Hodesto of $60,000, in cash, to their
common stockholders, will in each instance
constitute a distribution of progerty under
section 501 of the Internal Revenue Code of
1954. Each such distribution will constitute
a taxable dividend, under section 501, to the
extent of the earnings and nrofits of the
corporation available for the payment of
dividends within the meaning of section 516
of the Code. Under section 243, there will
be allowed as a deduction to Slakey Brothers
an amount equal to 85 percent of the enount
of the dividends so received.

(a) ‘he exchange of all the outstanding shares
of Class B nonveting common stock for new
shares of Class 4 voting stock and the ex-
change of all the outstanding shares of
$10 par value nonvoting preferred stock
for new shares of 9100 par value voting
preferred stock of Sacramento, San Jose,
Modesto and Oakland will in each instance
constitute a recapitalization and therefore
a reorganization within the meaning of
section 368(2)(1)(Z) of the Code, and
no gain or loss will be recognized to
Sacramento, San Jose, Modesto or Cakland
as a result thereof.

(b) In accordance with the provisions of section
554(a)(1), no gain or loss will be recog-
nized to Slakey Brothers as the holder of
all the outstanding Class B common stock
of each corporation upon the surrender of
such stock for the Class A common stock
of such corporation or to the Profit Sharing
Trust as the holdér of all the outstanding
preferred stock of each corporation upon
the surrender of such stock for the new
shares of preferred stock of such corpo-
ration, on the basis deserided above.Slakey Brothers, Inc. ~3-

CH)

(ce)

()

(a)

The vesis of the Class A commen stock
recsived, by Slakey Brothers and of the
new preferred stock received by the
frofit Sharing Trust will be the sane
as the Federal income tax basis, as

of the date of the recapitalization, of
the stock exchanged therefor (section

358). :

No gain or loss will be recognized to

Slekey Brothers or Calsland upon the transfer

by Slakey Brothers to Oakland of its assets
gubdject to its liabilities, or the assumption

of any of its liabilities by Oakland, solely

for the Class. A common.stock of Cakland. (Sections
BSL and 357.)

The basis of the assets received by Oakland
will be the same as the basis of those
assets in the hands of Slakey Brothers
immediately prior to the transaction.
(Section 362.).

Under section 353, the basis of the Orkland
stock received by Slakey Brothers will be
the same as the basis of the property trans-
ferred, less the sum of the amount of the

_ljabilities to which the property is subject

plus the anount of any additional liabilities
assumed. .

In accordance with the provisions of
section 355 of the Code, no gain or
Loss will ve recognized to (and no
amount will be includible in the income
of) the group 4 shareholders of Slakey
Brothers upon the receipt by them of
all the outstanding stock of Sacramento”
and Modesto on a pro rata basis and the
group B shareholders of Slakey Brothers
upon the receipt by them of all the out-
standing stock of Oakland and San Jose on a
pre rata basis as a distribution in ex~
caange for all their stock of Slakey
Brothers.Slakey Brothers, Inc. ~Oe

(b)

(c)

~ (a)

The basis of the shares of Sacramento,
Sen Jose, Modesto and Oakland stock
received by the. Slakey Brothers share~
holders will be the same as the basis
of the shares of Slakey Brothers stock
surrendered. (Section 358(a).)

No gain or loss will be recognized to
Slakey Brothers on the receipt of its
stock in exchange for the stock of |
Sacramento, San dose, Modeste and Oakland.

As provided in section 312(i) of the

Code, proper allocation with respect to

the earnings and profits of Slakey Brothers -
and Sacramento, San Jose, Nodesto and
Oakland will be made in accordance with
section 1312-10 of the Regulations.

A copy of this letter should be attached to the Federal income
tax return of each interested party for the taxable year in
which the transactions sre consummated.

Pursuant to a power of attorney on file in this office, a
copy of this letter is being sent to Mr. Henry W. Howard.

Very truly yours,

WA pestle

irector, Tax Rulings’ Division