Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 20

            1990.  Because APECO had no accumulated earnings and profits, the                             
            distribution was treated as a nontaxable return of capital.                                   
                  Petitioners urge a number of points in an effort to                                     
            distinguish the instant case from the cases relied on by                                      
            respondent.  We have considered each of petitioners' contentions                              
            and discuss certain of them below.  Petitioners' first contention                             
            is that no negotiations for the sale of the horses were                                       
            undertaken prior to their transfer to APECO.  We, however, are                                
            not persuaded that the absence of prearrangement dictates the                                 
            result in the instant case.  Although prearrangement of the sale                              
            of transferred property is cogent evidence that the transferee                                
            passing title is a conduit and is not in substance the seller of                              
            property, Palmer v. Commissioner, 44 T.C. at 94-96; Abbott v.                                 
            Commissioner, T.C. Memo. 1964-65, affd. per curiam 342 F.2d 997                               
            (5th Cir. 1965), where property is readily marketable, and prior                              
            arrangements are therefore superfluous, the absence of                                        
            prearrangement is not decisive, Hallowell v. Commissioner, supra                              
            at 608.  In the instant case, the horses that were sold at                                    
            auction during 19897 were readily marketable.  Moreover, it is                                
            customary for horses of the quality of those transferred by Mr.                               
            Kluener to be sold at open auction, and very unusual for a sale                               
            to be made privately.  Consequently, we conclude that the absence                             
            of prearrangement is not decisive of the issue at hand.  Id.                                  

            7     Inasmuch as it is the gain realized from the sale of 37                                 
            horses at auction during 1989 that has given rise to the present                              
            controversy, we need not consider whether the four remaining                                  
            horses that were not disposed of in that manner were readily                                  

Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011