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a section 6662(a) accuracy-related penalty in the amount of
$1,659.1 After concessions,2 the issues for decision are: (1)
Whether a distribution of Nortel Networks Corp. (Nortel) stock
that petitioner received from BCE, Inc. (BCE), is taxable as a
dividend and (2) whether petitioner is liable for a section
6662(a) accuracy-related penalty for substantial understatement
of tax.
FINDINGS OF FACT
Some of the facts have been stipulated. We incorporate the
stipulated facts into our findings by this reference. Petitioner
resided in Alameda, California, when he filed the petition.
As of February 29, 2000, BCE, a Canadian corporation, owned
539,854,492 shares, or 38.2 percent, of the outstanding common
stock of Nortel. On or before May 9, 2000, BCE distributed a
portion of its Nortel stock to BCE’s shareholders in a spinoff
transaction.3 According to BCE’s consolidated statement of
1All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
2In a stipulation of settled issues, the parties agreed that
petitioner was liable for income taxes on the following items:
ordinary dividends in the amounts of $2,436.19, $3,015, $1,007,
and $421; a capital gain in the amount of $1,530; and unreported
taxable Social Security benefits in the amount of $1,065. The
parties also agreed that petitioner correctly reported an
ordinary dividend in the amount of $1,285.
3The parties repeatedly refer to the transaction as a
spinoff but do not contend that it was a qualifying spinoff under
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