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action undermines any claim that the shareholders had informally
agreed to liquidate in October 1988.
Briggs had several conversations with Shepard in October
1989, prior to WCWC's preparing ACT's 1988 Form 1120 tax return.
During those conversations, Briggs did not tell Shepard that ACT
had voted to liquidate. Briggs' failure to inform WCWC that ACT
had voted to liquidate until after Briggs was informed by WCWC
that there would be a large tax liability if ACT had not
liquidated also undermines a claim that ACT had informally
adopted a liquidation plan prior to the JSL sale.
Petitioner relies on Mountain Water Co. v. Commissioner, 35
T.C. at 426, to support finding an informal liquidation plan
based on facts and circumstances. In Mountain Water Co., the
sole asset was land that provided water for the company's water
business. The shareholders lost the land when it was condemned
by the State. The directors of the company had recognized that,
when the land was condemned, the purpose for the existence of the
company would cease. After the condemnation, the corporation
filed a certification of dissolution with the State and wound up
its affairs. This Court found that there was no question that
there was a good faith intention to liquidate the corporation
completely.
The instant case is distinguishable from Mountain Water Co.
The sale to JSL did not require a cessation of ACT's business.
The ACT shareholders had plans to continue ACT business whether
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