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B. Whether All or One-Half of the Remaining $120,059 Is
Includable in Petitioner’s Gross Income
The parties dispute how much of the remaining $120,059 is
petitioner’s gross income. Petitioner contends that he owned
only 50 percent of the stock of Elan and that, at most, one-half
of the remaining $120,059 is includable in his gross income
because Elan was an S corporation in 1990. Respondent contends
that petitioner owned all of the stock of Elan. Respondent also
contends that, even if petitioner owned only one-half of the
stock of Elan, all of the remaining $120,059 is income to him.
1. Whether Petitioner Owned All or One-Half of the Stock
of Elan
We are not convinced that petitioner owned only 50 percent
of the stock of Elan. In 1995, petitioner signed Elan's 1990
corporate tax return, which states that he owned 100 percent of
the common stock. He also authorized his former spouse to sign
Elan's New York City and State returns for 1985, which state he
was the only shareholder of Elan who owned more than 5 percent of
Elan's stock.
Petitioner testified that he and his former spouse were
equal business partners. Wahba testified that he believed
petitioner and his former spouse were each 50-percent partners
based on what petitioner's former spouse told him and his
observation that they both worked at the business. Petitioner
testified that Elan never issued any shares of stock and that the
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Last modified: May 25, 2011