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exchange for the stock. Sec. 331(a).9 The exchange generally is
treated as a disposition. Secs. 331(c), 1001.
Under section 334(a), the basis of property received in a
complete liquidation in which gain or loss is recognized by
the shareholder is the fair market value of such property
on the date of distribution (i.e., the basis is considered
stepped up to fair market value). Sec. 334(a). [Shelton
v. Commissioner, 105 T.C. 114, 120 (1995).]
In other words, the basis of property received by a shareholder
in a taxable corporate liquidation is equal to its fair market
value on the date it is distributed.
Petitioner's theory as to the computation of his basis in
the client list is erroneous. Petitioner has failed to present
evidence of the fair market value of the client list on the date
of distribution to him. Having failed to establish the basis,
petitioner is not entitled to the claimed loss.
As indicated, respondent bears the burden of proving that
petitioner incurred a capital gain upon the sale of the client
list. Respondent has failed to present any evidence as to the
fair market value of the client list as of November 1983. Since
the record does not reflect the fair market value of the client
list on the date it was distributed to petitioner, respondent has
failed to carry her burden of proving that petitioner incurred a
capital gain upon the sale of the client list.
Issue 6. Section 6651(a) Addition to Tax
9 Sec. 331(b) provides that sec. 301 (relating to effects
on shareholder of distributions of property) shall not apply to
any distribution in complete liquidation.
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