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A court must consider not only when the bare legal
title passed but also when the benefits and burdens of
the property, or the incidents of ownership were
acquired or disposed of in a closed transaction. In
deciding the question, the court looks to that party to
the transaction who has the greatest number of
attributes of ownership. A court should look to
practicalities, disregarding merely formal and not
useful rights and attributes. If it is found from all
the facts and surrounding circumstances that the
parties intended an agreement to result in the sale of
property, and the agreement transfers substantially all
the accouterments of ownership, the transaction will be
treated as a sale even though the parties intended the
legal title should not pass until later. Since courts
cannot successfully conjecture as to the subjective
intent of the parties, the objective evidence of intent
provided by the parties’ overt acts must be relied
upon. [Pacific Coast Music Jobbers, Inc. v.
Commissioner, 55 T.C. 866 (1971) (citations omitted),
affd. 457 F.2d 1165 (5th Cir. 1972).]
Although the tax consequences of owning shares of stock in
an S corporation are quite different than the tax consequences of
owning shares of stock in a corporation subject to tax under
subchapter C of the Internal Revenue Code, we must still look to
beneficial ownership in order to determine whether a taxpayer is
a shareholder of an S corporation. Hoffman v. Commissioner,
47 T.C. 218, 233 (1966) (“Our conclusion that beneficial
ownership of the stock, as opposed to technical legal title
thereto, is critical in determining who is a shareholder [of an
S corporation], is supported by * * * the general legislative
purpose underlying subchapter S.”), affd. 391 F.2d 930 (5th Cir.
1968) (fn. ref. omitted).
Petitioners’ argument is straightforward: Unless and until
petitioner paid for his stock, his agreement with Niesar Pahl was
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