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Diamond was incorporated on May 7, 1987. On June 1, 1988,
Diamond held its first shareholders' meeting. The minutes of
this meeting specified that, on June 1, 1987, Diamond was
authorized to issue 10,000 shares of section 1244 common stock.
The section 1244 plan stated that the maximum amount of
consideration that could be received by Diamond for the issuance
of this stock would be $1 million. Accordingly, even though
$1 million was authorized, only $10,000 was paid for the 10,000
shares issued. In that regard, the minutes of Diamond's first
meeting on June 1, 1988, reflect that petitioner, as one of the
incorporators, contributed $7,500 of the initial $10,000. Of the
10,000 shares of stock that Diamond had issued on June 1, 1987,
petitioner received 75 percent or 7,500 shares. Although
additional amounts over $10,000 were later paid to the
corporation, those payments were not designated as payment for
the 10,000 shares issued on June 1, 1988.
Petitioner relies heavily on Miller v. Commissioner, T.C.
Memo. 1991-126. In that case, the taxpayer formed a corporation
with another individual for the purpose of constructing a water
amusement park. The articles of incorporation provided for the
issuance of 100,000 shares of common stock at $1 par value per
share. The taxpayer and another individual were the directors,
and each paid one-half of the fees for incorporation or $210. A
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