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his taking care of the corporate liabilities and recovering his
own investment, manifested WSAI’s intention to liquidate, and
that that intention was carried out in the informal winding-up of
WSAI's affairs that followed.
III. Computation of Gain
Having found that WSAI was liquidated in 1988, we turn to
the tax treatment of petitioner’s receipt of the condominium
units. Section 331(a) provides that amounts received by a
shareholder in complete liquidation of a corporation shall be
treated as “full payment in exchange for the stock”, considering
a liquidating distribution, in effect, as a sale by the
shareholder of his stock to the corporation. Bittker & Eustice,
Federal Income Taxation of Corporations & Shareholders, at 10-4,
10-5 (6th ed. 1994); S. Rept. 398, 68th Cong., 1st Sess. 11
(1924), 1939-1 C.B. (pt. 2) 266, 274. As a result, the
shareholder computes gain or loss under section 1001(a) by
subtracting the adjusted basis of his stock from the amount
realized (the fair market value of the distribution), and reports
the difference as capital gain or loss if the stock is a capital
asset in his hands.
To compute petitioner’s gain, we first look at the value of
the condominium units distributed to determine the amount
realized. We then look at whether petitioner’s deposits into the
WSAI checking account were loans or equity investments;
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