Rhaegar and Lyanna Targaryen began operating a landscaping business out of their home in 1976.The business was operated as a proprietorship.In 1992 the business was so successful that they incorporated Dragons Landscape by contributing all the assets and liabilities of the proprietorship in exchange for 100% of the outstanding common stock of Dragons.Rhaegar and Lyanna owned 100% of Dragons Landscape. Rhaegar has always been an employee of Dragons Landscape, but Lyanna was not an employee.Lyanna had done the bookkeeping for the proprietorship (she has a degree in accounting), but when it was incorporated an accountant was hired to work.By 2018, Dragons Landscape had 50 employees and gross sales of $15M.Dragons Landscape has been operating out of a building it leases from Rhaegar and Lyanna.Rhaegar and Lyanna bought the building in 1998 and the lease is set at a FMV rental. Rhaegar and Lyanna provide all significant services and pay all expenses of the building.Dragons Landscape pays rent monthly.In 1990, the Targaryen's purchased another landscape company, Martell Solutions.Rhaegar and Lyanna each own 50% of the outstanding stock of Martell Solutions.In early 2017, the Targaryens were beginning to think about retirement.Their daughter Daenerys Targaryen, had grown up learning the landscaping business from her parents, has been an employee of Dragons Landscape for 15 years and is Vice President of Operations.Khal Drogo has worked for Dragons Landscape for 20 years and is the CFO.Petyr Baelish is the Sales Manager for Dragons Landscape and began working for Dragons Landscape in 1995.When he was hired, Petyr negotiated an employment contract that included stock options.At that time, Daenerys and Khal's employment contracts were amended to also include stock options.None of these employees have exercised any options.In November 2017 Rhaegar was contacted by Universal Landscapes Corporation with an offer to buy Dragons Landscape and Martell Solutions for $4M.If Rhaegar and Lyanna sold Dragons Landscape and Martell Solutions to Universal Landscapes, Daenerys, Khal and Petyr would be paid cash for their employment contracts and would not be kept on as employees. Rhaegar discussed this deal with Daenerys, Khal and Petyr who decided to make a bid for Dragons Landscape and Martell Solutions at the same price of $4M.

The deal with Daenerys, Khal and Petyr was consummated on June 30, 2018.Dragons Landscape purchased 90% of the shares of Dragons Landscape stock held by Rhaegarand 90% of the Dragons Landscape stock held by Lyanna with a note payable with adequate stated interest.The note was payable each quarter, principal and interest, over fifteen years. Rhaegar and Lyanna then each sold the remaining 10% of their shares of Dragons Landscape stock to Daenerys (51%), Petyr (35%) and Khal (14%) at the same per share price as used for the redemption.Each individual purchased their stock by issuing a note payable with the same interest rate and terms as used for the redemption.Dragons Landscape purchased the Martell Solutions stock from Rhaegar and Lyanna issuing a promissory note with the same interest and terms as used for the redemption.The total purchase price was $4M and all notes are recourse notes.Dragons Landscape signed a new 15-year lease for the building with a slight increase in the monthly rent due to documented increases in the value of the property and similar rental property in the area.The lease also gave Dragons Landscape an option to buy the building from Rhaegar and Lyanna.Dragons Landscape also signed a ten-year employment contract with Lyanna to work in the accounting department.She will receive a salary commensurate with her degree and experience (but less than any of the other accountants receive) and fringe benefits including employee health insurance.This would ensure that Rhaegar and Lyanna would be covered under a health insurance plan.Lyanna receives the same benefits as all Dragons Landscape employees, and Dragons Landscape does not discriminate in the area of benefits.The notes and lease payments will provide sufficient retirement income for Rhaegar and Lyanna.Dragons Landscape's bank was not interested in financing this deal and any commercial lender would have required a security interest in the corporation's assets.Rhaegar and Lyanna took only a security interest in the stock and this allowed Daenerys, Petyr and Khal more flexibility in case they needed to borrow against the corporation's assets in the future.In effect, Rhaegar and Lyanna were financing the deal and were exposing themselves to a larger risk of default and lack of diversification in their assets.As part of the deal, all of the parties involved entered into a series of cross-default and cross-collateralization provisions.The net effect was that a default on any of the notes, the lease or Lyanna's employment contract would constitute a default on all the notes and allow Rhaegar and Lyanna to reacquire the Dragons Landscape stock to satisfy any unpaid debt. Rhaegar has not had any other dealings with Dragons Landscape since the redemption and sale of his stock.

• Discuss the tax ramifications of the following:
• Redemption of Dragons Landscape stock,
• Sale of the Martell Solutions stock,
• Lease of the building, and
• Lyanna's employment contract

as these transactions affect

• Rhaegar Targaryen,
• Lyanna Targaryen,
• Daenerys Targaryen,
• Petyr Baelish,
• Khal Drago,
• Dragons Landscape, and
• Martell Solutions.

Your discussion should include any recognized gain/loss, the basis of any stock acquired and the holding period of any stock acquired.These discussions will be of the applicable tax law without any calculations.