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reserved the right to serve as the "Investment Manager" of
IRA #2.
Contemporaneous with the formation of IRA #2, petitioner
incorporated H & S Swansons' Trading Company (hereinafter
Swansons' Trading or the FSC). Petitioner directed First Florida
to execute a subscription agreement for 2,500 newly issued shares
of Swansons' Trading stock. The shares were subsequently issued
to IRA #2, which became the corporation's sole shareholder.
Swansons' Trading filed a Form 8279, Election To Be Treated as a
FSC or as a Small FSC, on March 31, 1989, and paid a dividend to
IRA #2 in the amount of $28,000 during the taxable year 1990.
3. The Algonquin Property
In anticipation of Swansons' Tool's transferring its
operations to Florida, petitioners moved during 1981 from their
Algonquin, Illinois, residence (hereinafter, the Algonquin
property or the property) to a condominium in St. Petersburg,
Florida. The Algonquin property was not advertised for sale
until sometime during 1983.
Conscious of a change in the Internal Revenue Code which
would eliminate preferential treatment of capital gain recognized
on the sale of their home, petitioners sought to sell the
Algonquin property prior to December 31, 1986.5 As time was
5
The Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec.
301(a), 100 Stat. 2085, 2216, eliminated the deduction under sec.
(continued...)
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