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
marketable.
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