- 17 -
full amount required to pay all principal and interest due on the
debentures outstanding on the date of the call.
Between March 26, 1987, and April 1, 1987, Chemical Bank,
the indenture trustee, transferred to Metals' account by wire
transfer a total of $29,680,547.52. The amount of the transfers
represents an amount equal to the amount of principal and
interest payable by RMECC on the redemption date ($1,015.97 for
each $1,000.00 of face value) that would apply to $29,214,000
total face value of debentures. Because Metals had only received
$29,150,000 of debentures in exchange for shares, Metals received
cash payments for $64,000 face value of debentures to which it
was not entitled. Thus, on April 13, 1987, Metals transferred to
the indenture trustee by debit memorandum from Metals' bank
account at Chemical Bank $65,022.08.
On October 27, 1987, the Indenture Trustee destroyed the
certificates representing the 29,150 debentures acquired by
Metals in exchange for shares.
In a notice of deficiency, respondent disallowed
petitioners' claimed capital loss deduction in the amount of
$13,024,721, representing the difference between the cost of
exchanging Metals' stock (the fair market value of the stock plus
expenses incurred plus cash paid in lieu of fractional shares)
for the debentures ($42,174,721), and the face value of the
exchanged debentures ($29,150,000).
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011