- 62 -
Arnes v. United States, supra, had been wrongly decided.14 Under
the test that we expressed in Blatt v. Commissioner, supra at 81,
"A transfer that satisfies an obligation or a liability of
someone is a transfer on behalf of that person". Alice Berger's
sale of Woodbine to the Kunkowskis does not represent a sale on
behalf of Howard Berger, and thus section 1041 does not attribute
to Howard any gain realized by Alice on her sale of Woodbine to
the Kunkowskis.
Alice Berger asserts that "both parties, Alice and Howard,
were obligated to transfer Woodbine to the Kunkowskis". However,
neither Howard nor Alice was obligated to sell Woodbine until an
award was entered by the Chancery Court. The settlement
agreement stated that whoever was awarded Woodbine would
immediately sell it to the Kunkowskis. Howard Berger was not
awarded Woodbine and so was never obligated to sell it to the
Kunkowskis. We disagree with Alice's argument that her sale to
the Kunkowskis was made on behalf of Howard.
Alice Berger also argues that section 1041 does not apply
because the sale to the Kunkowskis was part of a step transaction
on behalf of Howard, and that, therefore, he must recognize gain
on the transfer of Woodbine to Alice. Alice also asserts that
14See also Arnes v. Commissioner, 102 T.C. 522 (1994). It
is unclear to what Court of Appeals appeal in this case would
lie, but it would almost certainly not be to the Court of Appeals
for the Ninth Circuit. Therefore Golsen v. Commissioner, 54 T.C.
742 (1970), affd. 445 F.2d 985 (10th Cir. 1971), does not
constrain us to follow Arnes v. United States, 981 F.2d 456 (9th
Cir. 1992).
Page: Previous 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 NextLast modified: May 25, 2011