Rudolph A. Hardman, Frances N. Hardman and Hardman, Inc. v. United States

TANG, Circuit Judge:

Rudolph A. and Frances N. Hardman and Hardman, Inc. appeal district court decisions upholding tax deficiencies assessed by the Internal Revenue Service. The taxpayers characterized a $109,568 payment by Hardman, Inc. as part consideration for the purchase of property from Mrs. Hard-man. The Hardmans treated the payment as capital gain and Hardman, Inc. added the payment to its basis in the property. The IRS characterized the payment as a dividend from Hardman, Inc. to Frances Hardman taxable as ordinary income to Mrs. Hardman and improperly added to the corporation’s basis…