11
payable amounts due Thor from S&B and removed these items from
their respective books.
OPINION
Petitioner argues that S&B declared a dividend, and then in
a separate transaction, Thor sold the stock of S&B to the Buyer.
Petitioner concludes that the dividend and the subsequent sale
are independent transactions that fall within the purview of
Litton Indus., Inc. v. Commissioner, 89 T.C. 1086 (1987), and
that the regulations relied on by respondent are inapplicable to
the facts of this case. Respondent argues that, assuming S&B
paid a dividend in the amount of $1,245,880.36, Thor must reduce
its basis in the S&B stock by the amount of the dividend pursuant
to section 1.1502-32(b)(2)(iii), Income Tax Regs., if the
dividend was paid before the stock sale transaction or, in the
alternative, pursuant to section 1.1502-32(b)(2)(iii), Income Tax
Regs., in combination with section 1.1502-32T(b), Temporary
Income Tax Regs., 54 Fed. Reg. 10981 (Mar. 16, 1989), if the
dividend was paid after the stock sale transaction. Petitioner
bears the burden of proving that respondent's determination is
not correct. Rule 142(a); Welch v. Helvering, 290 U.S. 111
(1933).
Petitioner took the position during trial, presented
evidence, and argued on brief that a dividend had been declared
and paid. Respondent, in her brief, conceded that there had been
a dividend and argued that the effect of the dividend in this
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