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its assets to JSL, ACT transacted no other business, other than
in February 1990 filing its 1988 Federal income tax return.
On its 1988 Federal income tax return, ACT took the position
that the $405,776 gain it realized on the sale of its assets to
JSL was nontaxable pursuant to section 337 because ACT had
adopted a plan of complete liquidation on or before the sale date
of the assets. In a notice of deficiency issued to ACT for
taxable year 1988, respondent determined that ACT had not timely
adopted a plan of liquidation and that the gain was taxable,
resulting in an income tax liability for ACT of $136,903.
Respondent also determined that ACT was liable for additions to
tax of $102,677 under section 6653(b)(1) for fraud and $34,226
under section 6661 for substantial understatement of tax. ACT
petitioned the Tax Court.
In Association Cable TV, Inc. v. Commissioner, T.C. Memo.
1995-596, this Court held that ACT was liable for the tax on the
gain from the sale of its assets to JSL because no plan of
liquidation existed on or before the sale date. The Court also
sustained the additions to tax for fraud and for substantial
understatement. With respect to the addition to tax for fraud,
the Court found that ACT, through the actions of Briggs and
petitioner, had falsified documents to corroborate its 1988
Federal income tax return position that the asset sale
constituted a nontaxable liquidation pursuant to section 337.
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