- 85 -
because Howard Berger was the controlling owner of the Woodbine
business so that he earned its entire income, which was paid to
her as a property settlement. We hold that Alice Berger had
substantial authority for not reporting the ordinary income of
Woodbine that she was led to believe by her advisers was properly
taxable to Howard Berger.
We further believe that Alice Berger had substantial
authority, also in the form of a well-reasoned position, that she
had no taxable gain on the sale of Woodbine to the Kunkowskis.
Her position was that section 1041 and the temporary regulations
thereunder are susceptible to the interpretation and application
that the transfer of the full interest in Woodbine to Alice
Berger, followed by her previously agreed-upon court-ordered sale
to the Kunkowskis, was "on behalf of" Howard Berger, or should be
so regarded under step-transaction principles. Cf. Arnes v.
United States, 981 F.2d 456 (9th Cir. 1992).
Having concluded that Alice Berger had substantial authority
for her 1989 return position that there was no tax due on her
Woodbine transactions, we reject respondent's imposition of the
section 6662 accuracy-related penalty.
To reflect the foregoing,
24(...continued)
inhering accrued income elements. Compare Rev. Rul. 87-112,
1987-2 C.B. 207 with Asimow, "The Assault on Tax-Free Divorce:
Carryover Basis and Assignment of Income", 44 Tax L. Rev. 65
(1988). Our opinion in Balding v. Commissioner, 98 T.C. 368
(1992), a case of first impression holding that sec. 1041 trumps
the assignment of income doctrine (see discussion supra pp. 54-
55), was not published until March 1992.
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