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B. Whether Payments by Corporations to Departing Shareholders
Are To Redeem Stock or for Other Purposes
Petitioner relies on several cases in which a corporation
made payments to a departing shareholder to redeem the
shareholder's stock. Smith v. Commissioner, supra; Steffen v.
Commissioner, supra; Erickson v. Commissioner, supra; Estate of
Bette v. Commissioner, supra. Petitioner contends that these
cases require us to hold that CSB’s $5 million payment to
decedent’s estate was entirely for decedent’s stock. We
disagree. In each of these cases, the shareholders and
corporation intended the payment to be for stock. The facts are
different here. Unlike the agreements at issue in those cases,
the agreement here provides that the $5 million payment was for
both stock and work in process. Petitioner treats factual
findings in those cases as legal holdings and then asks us to
find facts here like the facts found in those cases. We discuss
these cases in more detail next.
1. Smith
In Smith v. Commissioner, supra, the taxpayer sold his stock
to two other shareholders. The stock purchase agreement required
the corporation to pay $8,500 to the taxpayer for his stock and
$14,750 for commissions. Id. at 708-709. Two of the
shareholders later agreed to pay $10,000 to the taxpayer for
his stock interest. Id. at 710-711. The corporation paid the
taxpayer $14,974. Id. at 711, 712 n.5. The agreement and
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