Richard L. Hutcheson and Deloris A. Hutcheson - Page 8

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            the parties, by one of the parties declaring a rescission of the                              
            contract without the consent of the other if sufficient grounds                               
            exist, or by applying to the court for a decree of rescission."                               
            Id. at 181-182.  When the annual accounting principle is taken                                
            into account, however, it supersedes the rescission if the                                    
            rescission occurs in a different year.  Id.                                                   
                  In situation one, the rescission occurred in the same                                   
            taxable year as the sale.  As a result, the income tax                                        
            consequences of the original sale would be disregarded for                                    
            Federal income tax purposes.  In situation two, the rescission                                
            did not occur until the following year.  At the end of the sale                               
            year, A and B were not in the same positions they were in before                              
            the sale.  In consequence, only the events of the first year,                                 
            1978, are considered in determining A's and B's income tax                                    
            liabilities for 1978.  "In both situations, the annual accounting                             
            period principle requires the determination of income at the                                  
            close of the taxable year without regard to subsequent events."                               
            Id. at 182.                                                                                   
                  Petitioners liken themselves to the taxpayers in situation                              
            one above.  In petitioners' case, the original sale took place on                             
            January 3, 1989, when the 100,000 shares of WalMart stock were                                
            sold.  After unsuccessful negotiations with Merrill Lynch,                                    
            petitioner attempted to utilize the unilateral rescission clause                              
            in Rev. Rul. 80-58, supra:  "A rescission may be effected * * *                               
            by one of the parties declaring a rescission of the contract                                  




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