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Frisch, E. Roger and Marie L....

Frontier Savings & Loan Association.

....

Frontier Savings Association and Subsidiaries

Gefen, Sidney J. and Lois I.....

Gerling International Insurance Co......

Glass, Barry S. and Shirley P., et al. (consolidated cases are

listed in Appendix A on pages 1181-1202)....

Groetzinger, Robert S. and Beverly L..

Grossman, Jerome A. and Sybil G..

Gulf Oil Corp....

Gulf Oil Corp...

Gulf Oil Corp....

H.K. Porter Co. and Subsidiaries...

Haley Brothers Construction Corp....

Haley, Francis J., Estate and Bonnie J., Individually and

Executrix

Haley, John W., Estate and Mary A..

Harvey, Melba L., Jr.

Helba, James, Jr ...

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305

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34

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838

665

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1471

679

1087

533

1329

135

324

548

689

498

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498

874

983

624

698

926

435

1417

876

905

297

734

794

874

1285

1213

56

Page

698

Levin, Bernard A. and Phyllis.
Levy, Lawrence and Rochelle, et al

794

Linwood Cementery Association, an Iowa Nonprofit Corporation... 1314 Little, John Russell, Estate

599

Maxwell, Larry S. and Vickey L..

783

Mearkle, Russell R. and Virginia R...

527

Michael, Glen E. and Sybil H

905

1412

251

1206

926

759

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349

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49

.....

Michaels, John Albert and Rebecca Hooper

"Miss Elizabeth" D. Leckie Scholarship Fund..

Morley, E. Dean and Merry ...

Mukerji, Aditya B. and Swati, et al.

Mullikin, Kathryn A.........

Munford, Inc......

Murphree, Terence H. and Mary V

Nielsen, Melvin C. and Gwen....

Northern Trust Co., Transferee and Trustee...

Osborne, Robert P. and Carol A....

Ownby, David G. and Kathleen.
Patrick, Harry W. and Renee L
Pearce, Leon

Pearlstein, Philip

Plume, David S., et al., Coexecutors
Pollei, Jon R. and Carol J... . . . .

Porter, H. K., Inc. and Subsidaries

Puri, Pritpal S.....

Ramirez, Alvaro.

Reich, Stephen G. and Shyla .

Reis, Bernard J., Estate

Roszkos, Louis E. and Vivian L

....

Schad, Mark G..

Simon, Arthur L., et al., Transferees and Trustees..

Slater, Seymour M....

Snyder, Howard M. and Virginia

South End Italian Independent Club, Inc.
Southern, Charles Baxter and Dorothy I..
Sparks, Frank D. and Emily J

Stamos, Theodoros ..

Stanley Works and Subsidiaries

Stockade Cafe, Inc......

Symington, James W. and Sylvia S.

Takahashi, Harry H. and Gloria J....

Thrall, Larry B. and Beverly W

Threlkeld, James E....

Tokarski, John J

Tomerlin Trust, Transferee..

Transpec Drilling Venture 1982-22, et al

Twin Oaks Community, Inc.
Vaughn, Charles and Dorothy B..
Ward, Charles W. and Virginia P..

...

1279

1451

389 1

892

126

926

1294

74

876

874

1233

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78

Wedvik, Albert F. and Ida E.....
Weidner, Leo A. and Shirley A...
Wenzel, Annemarie....

Wenzel, Helmut

Willey, Robert H., Jr, Transferee..
Zeta Beta Tau Fraternity, Inc.....
Zirker, Lawrence R. and Margaret E..

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REPORTS

OF THE

UNITED STATES TAX COURT

MICHAEL N. CERONE AND HELEN E. CERONE, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE,

RESPONDENT

STOCKADE CAFE, INC., PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Filed July 1, 1986.

Docket Nos. 1683-80, 1684-80,
28696-81, 27979-82.

P and his son were each 50 percent shareholders in C. Because of hostility between father and son, C redeemed all of P's stock therein. After the redemption, P continued to work as an employee of C for several years, but he retained no control over, and was not involved in the management of, the corporation after the redemption. Held, family hostility does not nullify the family attribution rules of sec. 318(a)(1), I.R.C. 1954, in determining whether the redemption satisfies the dividend equivalency test of sec. 302(b)(1), I.R.C. 1954, or the complete redemption test of sec. 302(b)(3), I.R.C. 1954. David Metzger Trust v. Commissioner, 76 T.C. 42 (1981) (Court-reviewed), affd. 693 F.2d 459 (5th Cir. 1982), cert. denied 463 U.S. 1207 (1983), followed. Held, further, under the attribution rules of sec. 318(a)(1)(A)(ii), I.R.C. 1954, P actually and/or constructively owned 100 percent of C's stock both before and after the redemption, and the redemption was thus essentially equivalent to a dividend within the meaning of sec. 302(b)(1), I.R.C. 1954. United States v. Davis,

1

397 U.S. 301, 307 (1970). Held, further: P's position as an
employee of C after the redemption is a prohibited interest
within the meaning of sec. 302(c)(2)(A)(i), I.R.C. 1954, so that
sec. 302(c)(2), I.R.C. 1954, does not prevent the application of
the attribution rules of sec. 318(a)(1), I.R.C. 1954, in testing
the redemption under sec. 302(b)(3), I.R.C. 1954. Seda v.
Commissioner, 82 T.C. 484 (1984) (Court-reviewed), followed.
Consequently, the redemption is not a complete redemption
within the meaning of sec. 302(b)(3), I.R.C. 1954, and thus is
taxable as a dividend under sec. 301, I.R.C. 1954, rather than
as a payment in exchange for stock under sec. 302(a), I.R.C.
1954.

David E. Pavel, for the petitioners.
Leonard A. Hammes, for the respondent.

Docket No.

1683-80

PARKER, Judge: In these consolidated cases, respondent determined deficiencies in petitioners' Federal income taxes as follows:

1684-80

28696-81

27979-82

Petitioner(s)

Michael N. Cerone

and Helen E. Cerone Stockade Cafe, Inc.

Michael N. Cerone

and Helen E. Cerone
Michael N. Cerone
and Helen E. Cerone

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Dec. 31, 1977
Dec. 31, 1978

Dec. 31, 1979

After concessions,1 the issues for decision are as follows:

2,726.00

2,934.00

3,195.00

'Petitioner Stockade Cafe, Inc., conceded that its taxable income for its taxable year ending Sept. 30, 1975, should be increased by the amount of $2,278 to reflect that claimed repair expenses in the amount of $2,092 were nondeductible capital expenditures and that claimed repair expenses in the amount of $186 were paid during a prior taxable year. In its petition, the corporate petitioner also alleged that if such claimed repair expenses were nondeductible capital expenditures, then respondent erred by not allowing petitioner an investment credit with respect thereto. Petitioner presented no evidence on this issue, nor did it argue the matter on brief. We need not address this issue because petitioner failed to meet its burden of proof and/or conceded the issue. See Rule 149(b), Tax Court Rules of Practice and Procedure.

In the statutory notice for 1974, respondent determined that petitioner Michael N. Cerone constructively received a $25,000 downpayment for his stock in the corporate petitioner during 1974. (Docket No. 1683-80.) In the statutory notice for 1975, respondent took the inconsistent position that petitioner received the payment during 1975. (Docket No. 28696-81.) On brief, respondent concedes that petitioner received the payment during 1975, and has therefore conceded the deficiency for 1974; however docket No. 1683-80 also involves a deficiency for the year 1976 which remains at issue.

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