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this case, on its somewhat unsatisfactory record, in a way that
enables us to avoid making the earnings and profits/dividend
determination, and leave the related corporate taxable income
question for another day, if respondent should decide to pursue
it.
The substantive tax question before us is whether
petitioner’s receipt of two condominium units, during the taxable
year 1988, was a taxable distribution from WSAI. Respondent
determined that petitioner’s receipt of the last two units was a
dividend in the amount of $135,800 during the taxable year 1988.
Petitioner contended that his receipt of the units was not
taxable to him because it was offset by discharge of WSAI’s debt
to him, and his assumption of the Foss, Navar, and Posa notes.
Petitioner also maintained that his receipt of the two units
could not be a dividend because WSAI had no earnings and profits.
Petitioner, in his reply brief, raised the alternative
argument that he received the condominium units in de facto
liquidation of WSAI, which would entitle him to use the basis of
his WSAI stock to compute his gain on the distribution, if we
should determine that his payments into WSAI represented equity
rather than debt. Because it appeared to us that this position
10(...continued)
related questions of corporation tax and transferee liability,
and shareholder gain on liquidation, see Schneider v.
Commissioner, 65 T.C. 18 (1975).
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