Shelton v. Commissioner
United States Tax Court
On June 22, 1981, P's wholly owned corporation (J) sold stock of another corporation (E) to a third corporation (W) in exchange for a 20-year promissory note (Note). The stock of E served as collateral for the sale. Pursuant to the liquidation of J the note was distributed to P, and P reported the sale on the installment method. On Mar. 31, 1983, E sold its assets to an unrelated third party for cash and the assumption of liabilities.
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On June 22, 1981, P's wholly owned corporation (J) sold stock of another corporation (E) to a third corporation (W) in exchange for a 20-year promissory note (Note). The stock of E served as collateral for the sale. Pursuant to the liquidation of J the note was distributed to P, and P reported the sale on the installment method. On Mar. 31, 1983, E sold its assets to an unrelated third party for cash and the assumption of liabilities. On the same day, E and W adopted plans of liquidation pursuant to sec. 337, I.R.C. On Mar. 31, 1984, pursuant to the liquidations, the assets of E and W,…
1Opinion of the Court
Parr, Judge:
Respondent determined a deficiency in petitioner’s Federal income tax and an addition to tax for 1984 in the amounts of $2,899,796 and $724,949, respectively.
The issue for decision is whether petitioner received additional income on an installment obligation as a result of a liquidation of the corporate stock that was the subject of the installment sale and that was also the collateral for the installment sale. If we determine that petitioner had additional income, then we must decide whether petitioner is liable for the addition to tax for substantial understatement of Federal…
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