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the Form 1099 the corporation issued to the taxpayer described
the $14,974 payment as commissions. Id. at 712. We held that
the parties meant for the total payment of $24,974 to be for
stock redemption because the taxpayer had no right to receive
commissions, the other shareholders intended to use the
corporation's income to buy the taxpayer's stock, and the fair
market value of the stock was about $25,000. Id. at 716-717.
Petitioner argues that the amount of insurance CSB bought
($5 million) is evidence of the fair market value of decedent’s
stock, as in Smith. We disagree. CSB bought the insurance
policies to pay decedent’s estate $5 million for his stock and
any claims for cases or work in process. CSB and decedent did
not choose the amount of the insurance policies because it was
the fair market value of decedent’s stock; they chose it as a
price for both decedent's stock and any claim for cases or work
in process.
2. Steffen
In Steffen v. Commissioner, 69 T.C. 1049 (1978), a medical
corporation paid $40,000 to redeem the stock of one of its
shareholders. Id. at 1049. In setting that price, the
corporation considered the value of its accounts receivable.
Id. at 1051. Despite that fact, we held that none of the payment
was compensation; we held that the $40,000 was paid solely for
the taxpayer’s stock. Id. at 1053.
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